1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------------------------------------------------------------
FIRST FINANCIAL BANCORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------(Exact name of registrant as specified in its charter)
------------------------------------------------
OHIOOhio 6711 31-1042001
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL(State or other jurisdiction of (Primary Standard Industrial (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.Employer
incorporation or organization) Classification Code Number) Identification No.)
-------------------------
THIRD AND HIGH STREETS
HAMILTON, OHIO--------------------------------------------------
Third and High Streets
Hamilton, Ohio 45011
(513) 867-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------------------
MICHAEL(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------------------------------------------------
Michael R. O'DELL
COMPTROLLER
FIRST FINANCIAL BANCORP.
THIRD AND HIGH STREETS
HAMILTON, OHIOO'Dell
Senior Vice President, Chief Financial Officer and Secretary
First Financial Bancorp.
Third and High Streets
Hamilton, Ohio 45011
(513) 867-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------------------------(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------------------------------------------------------
Copy to:
NEIL GANULIN
FROST & JACOBS
2500 PNC CENTER
201 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 651-6800
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Approximate date of commencement of proposed sale
to the public: As soon as practicable after the
effective date of this Registration Statement.
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If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following box: / /[ ]
CALCULATION OF REGISTRATION FEE
=========================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT (1) PRICE (1) FEE
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Common Stock, par value
$8.00 per share 400,000 $34.50 $13,800,000 $4,759.00398,000 $33.875 $13,482,250 $4,650
=========================================================================================
(1) ESTIMATED IN ACCORDANCE WITH RULE 457(f)(1) SOLELY FOR THE PURPOSE OF
CALCULATING THE REGISTRATION FEE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
=========================================================================================
(1) ESTIMATED IN ACCORDANCE WITH RULE 457(f)(1) SOLELY FOR THE PURPOSE OF
CALCULATING THE REGISTRATION FEE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
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FIRST FINANCIAL BANCORP. CROSS REFERENCE SHEET
FORM S-4 ITEM PROXY STATEMENT CAPTION
------------- -----------------------
1. Forepart of Registration Statement Facing Page of Registration Statement; Cross Reference Sheet;
StatementSheet
and Outside Front Cover Page of Outside Front Cover Page of Proxy Statement-Prospectus;
Page of Prospectus IntroductionIntroduction;
2. Inside Front and Outside Back Available Information; Documents Incorporated by Reference;
Cover Pages of Prospectus Table of Contents
3. Risk Factors, Ratio of Earnings to Introduction; Summary; Comparative Market and Dividend
to
Fixed Charges and Other Information; Principal Shareholders and Ownership By Management
Information
4. Terms of the Transaction Summary; Description of the Merger; Comparison of Common Stock
and Shareholders' Rights
5. Pro Forma Financial Information Pro Forma Consolidated Balance Sheet; Pro Forma Condensed
Consolidated Statements of Earnings; Pro Forma Consolidated
Selected Financial Data
6. Material Contacts with the Company Summary; Description of the Merger
Company
Being Acquired
7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to Be Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
10. Information with Respect to S-3 Not Applicable
Registrants
11. Incorporation of Certain Not Applicable
Information by Reference
12. Information with Respect to S-2 or Documents Incorporated By Reference; Information About Bancorp;
orFirst
S-3 Registrants Financial; Comparative Market And Dividend Information
13. Incorporation of Certain Documents Incorporated By Reference
Information by Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-3 or S-2
Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 or Not Applicable
or
S-3 Companies
17. Information with Respect to Information About the Business of F&M; F&M's ConsolidatedHastings Financial; Hastings Financial's
Companies Other than Consolidated Financial Statements; Management's Discussion and Analysis of
S-3 or S-2 Companies Financial Condition and Results of Operations of F&M;Hastings Financial; Comparative
Market and Dividend Information; Comparison of Common Stock and Shareholders'
Rights
18. Information if Proxies, Consents Notice of Special Meeting of Shareholders; Documents
or Authorizations are to be Incorporated By Reference; Introduction; Summary; Description of
Solicited of the Merger; Principal Shareholders and Ownership By Management;
Information About the Business of F&MHastings Financial
19. Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited or in an Exchange Offer
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____________,November __, 1996
Dear Fellow Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
(the "Special Meeting") of F & M BancorpHastings Financial Corporation ("F&M"Hastings Financial")
to be held on _________December __, 1996 at 3:00 p.m.____ _.m. local time. At the Special Meeting,
you will be asked to consider and vote on certain matters, including a proposal
to approve the Plan and Agreement of Merger dated September 11, 1995July 2, 1996 (the "Merger
Agreement") between First Financial Bancorp. ("Bancorp"First Financial") and F&M,Hastings
Financial, pursuant to which F&MHastings Financial will merge with and into BancorpFirst
Financial (the "Merger"). Upon consummation of the Merger, the aggregate number
of BancorpFirst Financial shares to which the holders of F&MHastings Financial shares
shall be entitled shall be determined by dividing $12,500,000$10,000,000 by the per share
value of BancorpFirst Financial shares, which figure will be determined and adjusted in
accordance with and as specified in the Merger Agreement, as summarized in the
accompanying Proxy Statement-Prospectus.
The Merger Agreement has been unanimously approved by your Board of
Directors and is recommended by the Board to you for approval. The enclosed
Notice of Special Meeting and Proxy Statement-Prospectus include a description
of the proposed Merger and provide specific information concerning the
transaction. Please read these materials and consider carefully the information
set forth in them.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, sign, and promptly return the enclosed proxy form. If you attend the
Special Meeting, you may vote in person if you wish, even if you have previously
returned your proxy. The Merger is a significant step for F&MHastings Financial and
your vote on this matter is of great importance.
On behalfON BEHALF OF THE BOARD OF DIRECTORS, I RECOMMEND THAT YOU VOTE FOR
APPROVAL OF THE MERGER BY MARKING THE ENCLOSED PROXY FORM "FOR" IN ITEM ONE.
Sincerely,
Larry J. Kornstadt
Chairman of the Board, of Directors, I recommend that you vote for
approval of the Merger by marking the enclosed proxy form "FOR" in item
one.
Sincerely,
William J. Gordon
President and
Chief Executive Officer
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F & M BANCORP
729 MAINHASTINGS FINANCIAL CORPORATION
241 WEST STATE STREET
ROCHESTER, INDIANA 46975-0567HASTINGS, MICHIGAN 49058
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ______DECEMBER __, 1996
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of F & M BancorpHastings Financial Corporation ("F&M"Hastings Financial") will
be held at the Main Office of Farmers & MerchantsNational Bank 729 Main Street, Rochester, Indiana 46975-0567,of Hastings on _______December __, 1996 at
3:00 p.m.____ __.m., local time, to consider and act upon the following matters, each of
which is more completely set forth in the accompanying Proxy
Statement-Prospectus:
1. The approval of the Plan and Agreement of Merger dated September 11, 1995July
2, 1996 by and between First Financial Bancorp. ("Bancorp"First Financial") and
F&M,Hastings Financial, a copy of which is attached hereto as Appendix A
(the "Merger Agreement"), and the transactions contemplated thereby,
including the merger of F&MHastings Financial with and into BancorpFirst
Financial (the "Merger"), pursuant to which the following will occur on
the effective date of the Merger (the "Effective Time"):
(a) Each of the outstanding shares of F&MHastings Financial
will be canceled and extinguished in consideration
and exchange for a number of shares of BancorpFirst
Financial specified by the Merger Agreement;
(b) F&MHastings Financial will merge with and into BancorpFirst
Financial at the Effective Time and BancorpFirst Financial
will be the continuing, surviving and resulting
corporation in the Merger; and
(c) Farmers & MerchantsNational Bank ("Farmers & Merchants"),
F&M'sof Hastings, Hastings Financial's only
subsidiary, will merge with and into
Indiana Lawrence Bank ("Indiana Lawrence"),become a wholly owned subsidiary of
Bancorp, and Indiana Lawrence will
be the continuing, surviving and resulting corporation
in the Merger.First Financial.
2. A proposal to permit the Special Meeting to be adjourned or
postponed, in the discretion of the proxies, which adjournment or
postponement could be used for the purpose, among others, of allowing
time for the solicitation of additional votes to approve the Merger
Agreement.
3. A proposal to divide the members of the Board of Directors
of F&M into three groups, as nearly equal in number as possible, with
the term of the first group to expire at the 1996 annual meeting of F&M
shareholders, the term of the second group to expire at the 1997 annual
meeting and the term of the third group to expire at the 1998 annual
meeting; and to ratify all actions of the Board of Directors of F&M
taken prior to the division of its members into three groups.
4. The transaction of such other business as may properly come
before the Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on ______ __,
1995,___________,
1996, are entitled to receive notice of and to vote at the Special Meeting or
any adjournment thereof. Shareholders of F&MHastings Financial entitled to vote at
the Special Meeting may dissent from the Merger and obtain payment of the value
of their F&MHastings Financial Common Stock in the manner provided under Indiana Code Chapter 23-1-44,Michigan
Business Corporations Act Sections 450.1761-450.1774, a copy of which is
attached hereto as Appendix C.
Whether or not you plan to attend the Special Meeting, please complete,
date, and sign the enclosed proxy form and return it at once in the stamped
return envelope. The submission of such Proxy does not affect your right to vote
in person in the event that you attend the Special Meeting.
By order of the Board of Directors
-----------------------------------
George R. Hoover,David C. Wren, Assistant Secretary
Rochester, Indiana
______Hastings, Michigan
November __, 1996
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F & M BANCORPHASTINGS FINANCIAL CORPORATION
Proxy Statement For Special Meeting of Shareholders
To be Held _______December __, 1996
-------------------------
FIRST FINANCIAL BANCORP.
Prospectus
Up to 400,000398,000 Shares of Common Stock, Par Value $8.00 Per Share
This Proxy Statement-Prospectus is being furnished to the shareholders
of F & M BancorpHastings Financial Corporation ("F&M"Hastings Financial") in connection with the
solicitation by the Board of Directors of F&MHastings Financial of proxies for use
at the Special Meeting of Shareholders ("Special Meeting") to be held _______December
__, 1996, at 3:00 p.m.____ _.m., local time, at the Main Office of Farmers & MerchantsNational Bank 729 Mainof
Hastings, 241 West State Street, Rochester, Indiana
46975-0567,Hastings, Michigan 49058, and at any
adjournments thereof. This Proxy Statement-Prospectus and the accompanying form
of Proxy are being mailed to F&M'sHastings Financial's shareholders on or about
_______November __, 1995.1996.
This Proxy Statement-Prospectus is also the prospectus of First
Financial Bancorp., an Ohio corporation ("Bancorp"First Financial"), in respect of up to
400,000398,000 shares of Bancorp'sFirst Financial's Common Stock, par value $8.00 per share (the
"Bancorp"First Financial Common Stock"), to be issued in connection with the merger of
F&MHastings Financial with and into BancorpFirst Financial (the "Merger"). BancorpFirst Financial
will be the surviving entity. Farmers & Merchantsentity and National Bank of Hastings, the bank subsidiary
wholly owned by F&M,Hastings Financial, will then merge with and into Indiana
Lawrence Bank,become a wholly owned subsidiary of
Bancorp (the "Subsidiary Merger"),
and Indiana Lawrence Bank will be the continuing, surviving and resulting
corporation in the Subsidiary Merger.First Financial.
As a result of the Merger, the aggregate consideration to be received
by all F&MHastings Financial shareholders is fixed in the Merger Agreement at
$12,500,000,$10,000,000 (the "Merger Price"), payable in shares of BancorpFirst Financial Common
Stock. The totalIf the Effective Time is after January 1, 1997, the Merger Price will be
fixed at $10,000,000 plus a sum equal to National Bank of Hastings' earnings
after January 1, 1997, excluding transaction-related costs, payable in shares
of First Financial Common Stock. Each Hastings Financial shareholder who does
not dissent to the Merger will be entitled to receive from First Financial in
exchange for each share of Hastings Financial Common stock, par value $1.00 per
share (the "Hastings Financial Common Stock"), surrendered in the Merger a
number of shares of Bancorp Common
StockFirst Financial equal to be issued as a resultthe quotient (the "Exchange Ratio")
of the Merger (the "Deliverable Shares")Price divided by the average price of First Financial shares,
which figure will be determined and adjusted in accordance with and as specified
in the Merger Agreement, as summarized in "DESCRIPTION OF THE MERGER--Exchange Ratio." Each
shareholder of F&M who does not dissent toand further divided by the Merger will be entitled to
receive atotal number of shares of
BancorpHastings Financial Common Stock equal to the Deliverable
Shares multiplied by a fraction, the numerator of which is the number of F&M
Shares held by that shareholder immediately prior to the Effective Time and the
denominator of which is the number of F&M Shares outstanding immediately prior to the Effective
Time. The Merger will constitute a "reorganization" for federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, as a general rule, no gain or loss should be recognized by
shareholders of F&M to the extent such shareholders exchange their securities
solely for Bancorp Common Stock in the Merger. See "DESCRIPTION OF THE
MERGER-Federal Income Tax Consequences of the Merger."INTRODUCTION--General."
The closing sales price of BancorpFirst Financial Common Stock on _______November __,
1996, the last trading date before the printing of the Proxy
Statement-Prospectus, was $__.__ per share.$_____. The Merger may be terminated by BancorpFirst
Financial if the average price,
of Bancorp Common Stock, as defined in the Merger Agreement, (the "Average
Price")of First
Financial Common Stock falls below $28.48$27.625 per share or by F&MHastings Financial if
the Average Price of Bancorp
Common Stockaverage price exceeds $38.53$37.375 per share.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement-Prospectus does not constitute an offer
to sell, or a solicitation of an offer to purchase, the securities offered by
this Proxy Statement-Prospectus, or the solicitation of a proxy, in any
jurisdiction in which, or from any person to whom, it is unlawful to make such
offer, or solicitation of an offer, or proxy solicitation. Neither the delivery
of this Proxy Statement-Prospectus nor any distribution of the securities
offered pursuant to this Proxy Statement-Prospectus shall, under any
circumstances, create an implication that there has been no change in the
information set forth herein or in the affairs of F&MHastings Financial or BancorpFirst
Financial since the date of the Proxy Statement-Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT ENTITY.
-------------------------
The date of this Proxy Statement-Prospectus is _______November __, 1996.
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AVAILABLE INFORMATION
Bancorp---------------------
First Financial has filed a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the "SEC") with
respect to the BancorpFirst Financial Common Stock to be issued in connection with the
Merger. As permitted by the rules and regulations of the SEC, this Proxy
Statement-Prospectus omits certain information contained in the Registration
Statement. Copies of that information may be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the prescribed fees.
In addition, BancorpFirst Financial is subject to the informational, reporting
and proxy statement requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the SEC. Copies of such reports, proxy
statements and other information can be obtained, at prescribed rates, from the
SEC by addressing written requests for such copies to the Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports, proxy
statements and other information can be inspected at the public reference
facilities referred to above and at the regional offices of the SEC as follows:
New York Regional Office Chicago Regional Office
7 World Trade Center Northwestern Atrium Center
Suite 1300 500 West Madison Street
New York, New York 10048 Suite 1400
Chicago, Illinois 60661
BancorpFirst Financial Common Stock is traded in the over-the-counter market
and quoted on the Nasdaq National Market System. Documents filed by BancorpFirst
Financial with the SEC can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
F&MHastings Financial is not subject to the requirements of the Exchange
Act.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM MICHAEL R. O'DELL, COMPTROLLER,SENIOR VICE
PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY, FIRST FINANCIAL BANCORP.,
THIRD AND HIGH STREETS, HAMILTON, OHIO 45011. TELEPHONE REQUESTS MAY BE DIRECTED
TO BANCORPFIRST FINANCIAL AT (513) 867-4700. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ________DECEMBER __, 199_.1996 [5 DAYS BEFORE
MEETING DATE].
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The following documents previously filed with the SEC by BancorpFirst
Financial are hereby incorporated by reference herein:
1. Bancorp'sFirst Financial's Annual Report on Form 10-K for the fiscal
year ended December 31, 19941995 (the "Bancorp"First Financial Form 10-K"10-
K"); and
2. Bancorp'sFirst Financial's Quarterly Report on Form 10-Q for the
quarters ended March 31 and June 30, and September 30, 1995.1996.
3. The following information set forth in the 19941995 Annual Report
of BancorpFirst Financial to its shareholders:
(a) The information in the table set forth on page 4248
under the caption "Quarterly Financial And Common
Stock Data."
(b) The information in the table set forth on page 1722
under the caption "Table 1 - Financial Summary."
(c) The information set forth on pages 1621 through 2430
under the caption "Management's Discussion And
Analysis Of Financial Condition And Results Of
Operations."
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus is accompanied by Bancorp's 1994First Financial's
1995 Annual Report to Shareholders and Bancorp'sFirst Financial's Quarterly Report on
Form 10-Q for the quarter ended SeptemberJune 30, 1995.1996.
Following the Merger, BancorpFirst Financial will continue to be subject to
the informational, reporting and proxy statement requirements of the Exchange
Act.
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TABLE OF CONTENTS
INTRODUCTION
INTRODUCTION
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .General............................................................................................... 3
Record Date, Solicitation And Revocability Of Proxy . . . . . . . . . . . . . . . . 4Proxy................................................... 5
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Required......................................................................................... 5
Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Outstanding.................................................................................... 6
Restrictions On Resale Of First Financial Common Stock................................................ 6
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shareholder Proposals To Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . .Matters......................................................................................... 7
SUMMARY
Terms Of The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .Agreement......................................................................... 8
Reasons For The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Merger................................................................................ 8
Approval Of Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Agreement.......................................................................... 8
Other Possible Acquisition By First Financial......................................................... 12
Summary Of Selected Unaudited Financial Data And Per Share Data . . . . . . . . . . 12Data........................................ 13
Selected Unaudited Consolidated Financial Data And Per Share Data . . . . . . . . . 13Data...................................... 14
Notes To Selected Unaudited Consolidated Financial Data And Per Share Data . . . . 15............................ 16
DESCRIPTION OF THE MERGER
Background And Reasons For The Merger . . . . . . . . . . . . . . . . . . . . . . . 17Merger.................................................................. 18
Opinion Of Financial Advisor To F&M . . . . . . . . . . . . . . . . . . . . . . . .Hastings Financial..................................................... 19
Structure Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Deliverable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23............................................................................... 22
Surrender Of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 24....................................................................... 22
Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.................................................................................. 23
Effective Time Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Merger........................................................................... 23
Conditions To Consummation Of The Merger . . . . . . . . . . . . . . . . . . . . . . 25Merger............................................................... 23
Termination Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26............................................................................. 25
Management Following The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 27Merger........................................................................ 25
Interest Of Certain Persons In The Merger . . . . . . . . . . . . . . . . . . . . . 27
Shareholders' Rights Of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . 29Merger.............................................................. 26
Dissenters' Rights..................................................................................... 28
Federal Income Tax Consequences Of The Merger . . . . . . . . . . . . . . . . . . .......................................................... 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Treatment................................................................................... 32
Regulatory Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............................................................................. 33
Pro Forma Unaudited Financial Information . . . . . . . . . . . . . . . . . . . . . 34Information.............................................................. 33
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . .SHEET.................................................................. 35
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS . . . . . . . . . . . . . . . . . . .EARNINGS......................................................... 36
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . 41STATEMENTS.............................................. 39
INFORMATION ABOUT BANCORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43FIRST FINANCIAL............................................................................... 41
INFORMATION ABOUT THE BUSINESS OF F&M
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44HASTINGS FINANCIAL
General................................................................................................ 42
Competition............................................................................................ 42
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45............................................................................................ 43
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45............................................................................................ 43
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Proceedings...................................................................................... 43
Certain Transactions With Hastings Financial........................................................... 43
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Data................................................................................ 44
Analysis Of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . 47Income........................................................................ 45
Interest Income And Expense Rate/Volume Analysis . . . . . . . . . . . . . . . . . . 48Analysis....................................................... 46
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Securities.................................................................................. 46
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Portfolio......................................................................................... 47
Deposits............................................................................................... 50
Return On Equity And Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
INFORMATION ABOUT THE MANAGEMENT OF F&M
F&M's Board Of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Board Meetings And Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Executive Officers Of F&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Certain Transactions With F&M . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
F & M Bancorp--MANAGEMENT'SAssets............................................................................ 50
HASTINGS FINANCIAL CORPORATION--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR YEARS ENDED APRIL 30,DECEMBER 31, 1995, 1994 AND 1993 . . . . . . . . . . . . . . . . . 581993.................................................. 51
1
9
TABLE OF CONTENTS, CONTINUED
F&M
HASTINGS FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
Report Of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2Auditors........................................................................ F-3
Consolidated Balance Sheets - April 30,December 31, 1995 And 1994 . . . . . . . . . . . . . . . F-31994...............................................F-4
Consolidated Statements Of Income -
Years Ended April 30,December 31, 1995, 1994 And 1993 . . . . . . . . . . . . . . . . . . . . F-41993.........................................................F-5
Consolidated Statements Of Changes In Shareholders' Equity -
Years Ended April 30,December 31, 1995, 1994 And 1993 . . . . . . . . . . . . . . . . . . . . F-51993.........................................................F-6
Consolidated Statements Of Cash Flows -
Years Ended April 30,December 31, 1995, 1994 And 1993 . . . . . . . . . . . . . . . . . . . . F-61993.........................................................F-7
Notes To Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . F-7
F & M Bancorp--MANAGEMENT'SStatements.............................................................F-9
HASTINGS FINANCIAL CORPORATION--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED OCTOBER 31, 1995JUNE 30, 1996 AND 1994 . . . . . . . . . . . . . . 64
F&M1995................................................... 57
HASTINGS FINANCIAL CORPORATION AND SUBSIDIARY UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet - October 31, 1995 . . . . . . . . . . . . . . . . . . . 69June 30, 1996............................................................. 60
Consolidated Statements Of Income -
Six Months Ended October 31, 1995June 30, 1996 And 1994 . . . . . . . . . . . . . . . . . . . . 701995.............................................................. 61
Consolidated Statements Of Changes In Shareholders' Equity -
Six Months Ended October 31, 1995 And 1994 . . . . . . . . . . . . . . . . . . . . 71June 30, 1996....................................................................... 62
Consolidated Statements Of Cash Flows -
Six Months Ended October 31, 1995June 30, 1996 And 1994 . . . . . . . . . . . . . . . . . . . . 721995.............................................................. 63
Notes To Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 73Statements............................................................. 64
PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 76MANAGEMENT.............................................................. 66
COMPARATIVE MARKET AND DIVIDEND INFORMATION
Nature of Trading Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78Market............................................................................... 67
Dividends.............................................................................................. 68
COMPARISON OF COMMON STOCK AND SHAREHOLDERS' RIGHTS
Authorized But Unissued Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Shares......................................................................... 70
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Rights........................................................................................ 70
Interested Shareholders................................................................................ 71
Continuing Directors................................................................................... 72
Directors.............................................................................................. 73
Quorum For Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 80Meetings...................................................................... 74
Meeting Participation By Use of Communication Equipment................................................ 74
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Rights.......................................................................................... 74
Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Meetings....................................................................................... 74
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Rights...................................................................................... 75
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Rights..................................................................................... 75
Redemption And Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Assessment.............................................................................. 75
Amendments To Articles And Code Of Regulations/By-Laws . . . . . . . . . . . . . . . 81
Seventy-Five Percent (75%) Affirmative Shareholder Vote Required . . . . . . . . . . 81
Restrictions On Resale Of Bancorp Common Stock . . . . . . . . . . . . . . . . . . . 81
BancorpBy-Laws................................................. 76
First Financial Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 82Plan................................................................ 76
ADJOURNMENT OF THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84MEETING.............................................................................. 77
EXPERTS......................................................................................................... 78
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84MATTERS................................................................................................... 78
APPENDICES
Plan and Agreement of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . AppendixMerger....................................................................Appendix A
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AppendixOpinion................................................................................Appendix B
Indiana Code Chapter 23-1-44.Michigan Business Corporations Act Section 450.1762. Dissenters' Rights . . . . . . . . . . . . . . . . . AppendixRights........................Appendix C
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10
INTRODUCTION
General
- -------
This Proxy Statement-Prospectus and the accompanying form of proxy are
being furnished to the shareholders of F & M BancorpHastings Financial Corporation ("F&M"Hastings
Financial") in connection with the solicitation of proxies by the Board of
Directors of F&MHastings Financial for use at the Special Meeting of Shareholders
("Special Meeting") to be held on ______December __, 1996, at 3:00 p.m.____ _.m. local time.
At the Special Meeting, F&MHastings Financial shareholders will be asked
to approve the Plan and Agreement of Merger dated September 11, 1995July 2, 1996 by and between
F&MHastings Financial and First Financial Bancorp. ("Bancorp"First Financial"), a copy of
which is attached hereto as Appendix A (the "Merger Agreement"), and the
transactions contemplated thereby. If the Merger Agreement is approved by the
shareholders of F&M at the Special Meeting by at least a 75% majority vote of the
outstanding F&MHastings Financial shares and if certain other conditions to the
consummation of the transactions contemplated by the Merger Agreement, including
the receipt of all required regulatory approvals, are satisfied or are waived on
or before April 1, 1996, F&M30, 1997, Hastings Financial will merge (the "Merger") with
BancorpFirst Financial in a transaction in which the following will occur on the date
upon which the Merger becomes effective (the "Effective Time"):
(a) The outstanding shares of F&MHastings Financial common stock, without par
value $1.00 per share (the "F&M"Hastings Financial Common Stock"),
will be surrendered to BancorpFirst Financial in consideration and
exchange for a number of BancorpFirst Financial common shares, par
value $8.00 per share (the "Bancorp"First Financial Common Stock").
The aggregate consideration to be received by all Hastings
Financial shareholders is fixed in the Merger Agreement at
$10,000,000 (the "Merger Price"); if the Effective Time is
after January 1, 1997, the Merger Price will be fixed at
$10,000,000 plus a sum equal to National Bank of Hastings'
earnings after January 1, 1997, excluding transaction related
costs. At the Effective Time, each of the then issued and
outstanding shares of Hastings Financial Common Stock will be
surrendered to First Financial in consideration and exchange
for a number of First Financial common shares of Bancorp Common Stockequal to which the
holders of F&M Common Stock shall be entitled as a resultquotient (the "Exchange Ratio") of:
(1) the Merger Price, divided by
(2) the mathematical average (the "Average") of the Merger (the "Deliverable Shares") shall be determined by
dividing $12,500,000 by the mathematical
average of the closing daily bid and asked prices for
BancorpFirst Financial Common Stock onas reported by the
National Association of Securities Dealers Automated
Quotations System -("Nasdaq") National Market System ("Nasdaq") for eachthe
period of the twenty consecutive20 trading days on which more than 200 shares of Bancorp Common
Stock are traded ending on the secondat 4:00 p.m. (New
York time) three trading daydays prior to the Effective
Time, (the "Average Price").which resultant quotient is divided by
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11
(3) the aggregate number of shares of Hastings Financial
Common Stock issued and outstanding immediately prior
to the Effective Time.
The Exchange Ratio will be appropriately adjusted in the event
of the subdivision or split of the outstanding First Financial
Common Stock, a capital reorganization, or a reclassification
or recapitalization affecting First Financial Common Stock.
(b) F&MHastings Financial will merge with and into BancorpFirst Financial at
the Effective Time and BancorpFirst Financial will be the continuing,
surviving and resulting corporation in the Merger.
(c) Farmers & MerchantsNational Bank ("Farmers & Merchants"), F&M'sof Hastings, Hastings Financial's only
subsidiary, will merge with and into Indiana Lawrence Bank
("Indiana Lawrence"),become a wholly owned subsidiary of Bancorp (the
"Subsidiary Merger"), and Indiana Lawrence will be the
continuing, surviving and resulting corporation in the
Subsidiary Merger.
3
11First
Financial.
On _______November __, 1996, the last trading date before the printing of the
Proxy Statement-Prospectus, the closing sales price of a share of BancorpFirst
Financial Common Stock equalled $______.$_____. If ___________November __, 1996 were the Effective
Time, the Average Price would have been $_________,$________, the Deliverable SharesExchange Ratio would have
equaled _________ and the aggregate number of Bancorpshares of First Financial Common
Stock issued in exchange for all shares of F&MHastings Financial Common Stock would
have been _____________________. The market price and each shareAverage of F&M Common Stock would have been exchanged
for ____________ shares of Bancorp Common Stock (the "Exchange Ratio"). The
Average Price of BancorpFirst Financial Common
Stock on ___________November __, 1996 isare presented for illustrative purposes only and may
not be indicative of the market price and Average Price at the Effective Time.
A copy of the Merger Agreement, with Exhibits, setting forth the terms
of the Merger is attached to this Proxy Statement-Prospectus as Appendix A and
is incorporated herein by reference.
The Board of Directors of F&MHastings Financial has unanimously approved
the Merger and recommends that F&MHastings Financial shareholders vote FOR the
approval of the Merger.
The principal executive office of F&MHastings Financial is located at 729 Main241
West State Street, Rochester, Indiana 46975-0567.Hastings, Michigan 49058. The telephone number of F&M'sHastings
Financial's principal executive office is (219) 223-3105.(616) 945-3437.
The principal executive office of BancorpFirst Financial is located at Third
and High Streets, Hamilton, Ohio 45011. The telephone number of Bancorp'sFirst
Financial's principal executive office is (513) 867-4700.
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Record Date, Solicitation And Revocability Of Proxy
- ---------------------------------------------------
The Board of Directors of F&MHastings Financial has established the close
of business on ________________ __, 199_1996 as the record date (the "Record Date") for the
determination of the F&MHastings Financial shareholders entitled to receive notice
of and to vote at the Special Meeting. Only F&MHastings Financial shareholders of
record on the Record Date will be entitled to notice of and to vote at the
Special Meeting. Shares represented by properly executed proxies, if such
proxies are received before or at the Special Meeting and not revoked, will be
voted at the Special Meeting in accordance with instructions indicated in such
proxies. If no such instructions are given, shares represented by such proxies
will be voted:
FOR approval of the Merger Agreement;
FOR the adjournment of the Special Meeting in the event that a
sufficient number of votes necessary to approve the foregoing proposal
is not received; FOR the division of the members of the Board of Directors of
F&M into three groups, as nearly equal in number as possible, with the
terms of the first, second and third groups to expire at the 1996, 1997
and 1998 annual meetings of F&M shareholders, respectively; and the
ratification of all actions of the Board of Directors of F&M taken
prior to the division of its members into three groups.
4
12
In the discretion of the proxy holders on any other matter which may
properly come before the Special Meeting.
A shareholder who has given a proxy may revoke it at any time before
the Proxy is exercised by giving written notice of revocation to the Secretary
of F&M,Hastings Financial, by executing a later dated proxy or by attending and
voting in person or
by giving F&M notice of revocation in writing addressed to and received by F&M
before the Special Meeting.person. All written notices of revocation and other communication with
respect to revocation of proxies should be addressed to F&MHastings Financial as
follows: F & M Bancorp, 729 MainHastings Financial Corporation, 241 West State Street, Rochester, Indiana 46975-0567,Hastings,
Michigan 49058, Attention: George R. Hoover,David C. Wren, Assistant Secretary.
The cost of the solicitation of proxies will be borne by F&M. F&MHastings
Financial. Hastings Financial has not specially engaged employees or paid
solicitors to aid in the solicitation of proxies, but will reimburse brokerage
firms and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial owners of F&MHastings
Financial Common Stock. In addition to solicitation by mail, directors, officers
and regular employees of F&MHastings Financial may solicit proxies personally or by
telegraph or telephone, without additional compensation.
F&MHastings Financial shareholders are requested to complete, date and
sign the accompanying proxy form and return it promptly to F&MHastings Financial in
the enclosed postage paid envelope.
Vote Required
- -------------
APPROVAL OF MERGER. The affirmative vote of the holders of at least 75%a
majority of the outstanding shares of F&MHastings Financial Common Stock entitled
to vote at the Special Meeting is required for approval of the Merger Agreement.
Abstentions or non-votes are counted as present; however, the effect of an
abstention or a non-vote is the same as a "no" vote.
5
13
No shareholder vote on the Merger is required by the shareholders of
Bancorp.First Financial.
APPROVAL OF ADJOURNMENT. The affirmative vote of the holders of a
majority of the shares of F&MHastings Financial Common Stock represented in person
or by proxy at the Special Meeting will be required for approval of the
adjournment in the event that a sufficient number of votes necessary to approve
the foregoing proposals is not received. The effect of an abstention or a
non-vote for purposes of the vote required to approve the adjournment is the
same as a "no" vote.
APPROVAL OF DIVISION OF BOARD OF DIRECTORS. The affirmative vote of the
holders of a majority of the shares of F&M Common Stock will be required for
approval of the division of F&M's Board of Directors into three groups and the
ratification of all actions of the Board of Directors of F&M taken prior to the
division of its members into three groups. The effect of an abstention or a
non-vote for purposes of the vote required to approve the division of the Board
of Directors and the ratification of the Board's prior actions is the same as a
"no" vote.
5
13
Shares Outstanding
- ------------------
At the close of business on the Record Date, there were 5,63380,463 shares
of F&MHastings Financial Common Stock outstanding and entitled to vote, with each
share being entitled to one vote, and there were 10078 holders of record of shares
of F&MHastings Financial Common Stock. On such date, the directors and executive
officers of F&MHastings Financial as a group beneficially owned 3,02141,110 shares, an
amount equal to 53.63%51.09% of the shares of F&MHastings Financial Common Stock issued
and outstanding on such date. The directors and executive officers have
indicated their intention to vote for the Merger. See "DESCRIPTION OF THE
MERGER--Interests Of Certain Persons In The Merger" and "PRINCIPAL SHAREHOLDERS
AND OWNERSHIP BY MANAGEMENT."
Restrictions On Resale Of First Financial Common Stock
- ------------------------------------------------------
The issuance of the shares of First Financial Common Stock in
connection with the Merger has been registered under the Securities Act. Such
shares may be traded freely and without restriction under federal and state
securities laws by those shareholders not deemed to be "affiliates" of Hastings
Financial as that term is defined in Rules 144 and 145 under the Securities Act.
"Affiliates" are generally defined as persons who control, are controlled by, or
are under common control with Hastings Financial at the time of the Hastings
Financial Special Meeting. Accordingly, affiliates of Hastings Financial will
generally include the directors and executive officers of Hastings Financial as
well as Hastings Financial's largest shareholders. In general, shares of First
Financial Common Stock received by affiliates of Hastings Financial pursuant to
the Merger may not be publicly resold without registration under the Securities
Act except pursuant to the volume and manner of sale limitations and other
requirements provided in Rules 144 and 145. This Proxy Statement-Prospectus does
not cover any resales of First Financial Common Stock received by affiliates of
Hastings Financial. Any owner of Hastings Financial Common Stock who becomes an
affiliate of First Financial will be subject to similar restrictions under Rule
144.
6
14
Pursuant to the terms of the Merger Agreement, in order for the Merger
to qualify for pooling-of-interests accounting treatment, none of the First
Financial Common Shares held by shareholders who are affiliates of First
Financial or Hastings Financial may be sold until such time as financial results
covering at least thirty days of post-Merger combined operations of First
Financial and Hastings Financial have been published (the "Publication Date").
As a result, no shareholder who is an affiliate of First Financial or Hastings
Financial will be permitted to sell any First Financial Common Shares for the
period from the Effective Time to the Publication Date.
In addition, in order to preserve the proposed tax-free status of the
Merger and in order to ensure that the continuity of shareholder interest
requirements related thereto, and set forth in Treasury Regulation Section
1.368-1(b), will be satisfied with respect to the Merger, certain shareholders
of Hastings Financial participating in the Merger will be required to execute a
letter (the "Tax Letter") indicating the number of First Financial Common
Shares, if any, received by such shareholder in connection with the Merger with
respect to which such shareholder has a present plan or intention to dispose of
or sell.
Except as provided above, there will be no restrictions on the transfer
of shares of First Financial Common Stock issued by First Financial pursuant to
the Merger.
Other Matters
Both Article VII, Section 7.3 of the Articles of Incorporation of F&M
and Article III, Section 2 of the By-Laws of F&M (the "Provisions") require that
the Board of Directors of F&M be divided into three groups, each group to be
composed of three directors. The Provisions further require that each group of
directors serve for a term of three years, with one group to stand for
reelection at each annual meeting of the shareholders of F&M.- -------------
The Board of Directors of F&M, however, has not previously been divided into three groups
and, as a result, each individual previously elected to serve as a member of the
Board of Directors of F&M has served for only a one-year period. In order to
resolve this discrepancy, the Board of Directors of F&M has proposed that the
shareholders of F&M approve the division of the Board into three groups, as
nearly equal in number as possible, with terms of the three groups to expire at
the 1996, 1997 and 1998 annual meetings of the shareholders of F&M,
respectively. As a result, subject to the approval of the shareholders of F&M,
the terms of the current members of the Board of Directors of F&M will be as
follows:
Terms Expiring at 1996 Annual Meeting
Wendell B. Bearss
H. Robert Bradley
Carol J. Bridge
Terms Expiring at 1997 Annual Meeting
William J. Gordon
J. Frederick Hoffman
Terms Expiring at 1998 Annual Meeting
Robert E. Peterson
V. Lorene Rauschke
Although the shareholders of F&M may approve the division of the Board
of Directors of F&M as described above, if the Merger is consummated the
directors of F&M will resign as of the Effective Time and will not become
members of the Board of Directors of Bancorp.
The shareholders of F&M also will vote on whether to ratify all actions
of the Board of Directors of F&M taken prior to the division of its members into
three groups.
6
14
The Board of Directors of F&MHastings Financial is not aware of any other
business to come before the Special Meeting other than the matters described
above in the Proxy Statement-Prospectus. However, if any other matters should
properly come before the Special Meeting, the holders of the proxies will act in
accordance with their best judgment.
Shareholder Proposals To Bancorp
If an eligible shareholder wishes to present a proposal for action at
the 1997 Annual Meeting of Bancorp, it shall be presented to management by
certified mail, written receipt requested, not later than November 16, 1996, for
inclusion in Bancorp's Proxy Statement and form of Proxy relating to that
meeting. Any such proposal must comply with Rule 14a-8 promulgated by the
Securities and Exchange Commission pursuant to the Exchange Act. Proposals shall
be sent to First Financial Bancorp., Attention: Mike O'Dell, Comptroller, 300
High Street, P.O. Box 476, Hamilton, Ohio 45012-0476.
7
15
SUMMARY
The following is a brief summary of certain information in respect of
matters to be considered at the Special Meeting of F&MHastings Financial
shareholders and is not intended to be a complete statement of all material
facts regarding the matters to be considered at the Special Meeting. The Summary
is qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus, the accompanying
appendices and the documents incorporated herein by reference.
Terms Of The Merger Agreement
The Deliverable Shares to which F&M shareholders shall be entitled as a
result- -----------------------------
Upon consummation of the Merger, shallHastings Financial shareholders will
be determined by dividing $12,500,000 byentitled to receive for each share of Hastings Financial Common Stock a
number of shares of First Financial Common Stock equal to the Average
Price. InExchange Ratio.
The Exchange Ratio will be appropriately adjusted in the event of the
subdivision or split of the outstanding Bancorp
shares, the payment of a dividend in Bancorp shares orFirst Financial Common Stock, a capital
reorganization, or a reclassification or recapitalization affecting the closing price for Bancorp shares during some but not all of said
trading days, the number of Deliverable Shares will be adjusted proportionately
so that the holders of outstanding F&M shares shall receive the number of
Bancorp shares that represents the same percentage of the value of outstanding
Bancorp shares at the Effective Time as would have been represented by the
number of shares such shareholders would have received if the event had not
occurred. Each holder of F&M shares shall be entitled to a portion of the
Deliverable Shares that is equal to the number of Deliverable Shares multiplied
by a fraction, the numerator of which is the number of F&M shares held by that
shareholder immediately prior to the Effective Time and the denominator of which
is the number of F&M shares outstanding immediately prior to the Effective Time.First
Financial Common Stock.
Reasons For theThe Merger
- ----------------------
The Board of Directors of F&MHastings Financial believes that the Merger
is in the best interests of F&MHastings Financial and its shareholders. The Board
of Directors' recommendation is based on a number of factors discussed in this
Proxy Statement-Prospectus. See "DESCRIPTION OF THE MERGER--Background And
Reasons For The Merger." These factors include the costs of regulatory
compliance and technological advancements and increased competition in the
financial services industry.
8
16
Approval Of Merger Agreement
- ----------------------------
PARTIES TO THE MERGER AGREEMENT. BancorpFirst Financial is a corporation
organized under the laws of the State of Ohio and is registered as a bank
holding company as well as a savings and loan holding company. Its principal
executive offices are located in Hamilton, Ohio. BancorpFirst Financial owns ten commercial banking subsidiaries
- -Firstthe
following subsidiaries:
Bank subsidiaries:
First National Bank of Southwestern Ohio, Hamilton, Ohio;Ohio
Citizens Commercial Bank & Trust Company, Celina, Ohio;Ohio
Van Wert National Bank, Van Wert, Ohio;Ohio
Union Trust Bank, Union City, Indiana;Indiana
Indiana Lawrence Bank, North Manchester, Indiana;Indiana
Citizens First State Bank, Hartford City, Indiana;Indiana
Union Bank and Trust Company, North Vernon, Indiana;Indiana
Clyde Savings Bank Co.,Company, Clyde, Ohio;Ohio
Peoples Bank and Trust Company, Sunman, Indiana;Indiana
Bright National Bank, Flora, Indiana;
and two savingsIndiana
8
16
Savings bank subsidiaries -subsidiaries:
Fidelity Federal Savings Bank, Marion, Indiana and
Home Federal Bank, a Federal Savings Bank, Hamilton, Ohio.Ohio
Finance company subsidiary:
First Finance Mortgage Company of Southwestern Ohio, Inc., Hamilton,
Ohio
At SeptemberJune 30, 1995, Bancorp1996, First Financial had total assets of approximately
$2.0$2.2 billion, deposits of approximately $1.6$1.8 billion and shareholders' equity of
approximately $221$249 million. See Form 10-Q for the quarter ended SeptemberJune 30, 19951996
and "Item 1. Business" in the BancorpFirst Financial Form 10-K, both of which have
previously been incorporated herein by reference.
F&MHastings Financial was organized in 19841988 under the laws of the State of
IndianaMichigan and is registered as a bank holding company. Its only subsidiary,
Farmers & Merchants,National Bank of Hastings, was organized in 1934 under the laws1933. National Bank of the State of Indiana andHastings is
a state
chartered bank. Farmers & Merchants isprincipally engaged in the business of making mortgage loans secured by residential or other real property, and Farmers & Merchants also
makes secured and
unsecured consumer and commercial loans. LoanLoanable funds are obtained primarily
from deposits and loan principal repayments. In addition to originating loans,
Farmers & MerchantsNational Bank of Hastings invests in U.S. Treasurytreasury and other government agency
securities, corporate notes and municipal securities. Farmers
& MerchantsNational Bank of Hastings
conducts its business through two offices located in Rochester and
oneits main office located in Kewanna, Indiana.Hastings, Michigan and
a branch office located in Wayland, Michigan. Its primary market area consists
of the citiescity of RochesterHastings, Michigan and Kewanna, Indianathe Gun Lake-Wayland area in Michigan and
the contiguous areaareas within Fulton
County, Indiana.Barry and Allegan Counties, Michigan.
THE MERGER. If the Merger Agreement is approved by the F&MHastings Financial
shareholders byholding at least a 75% majority of the outstanding F&MHastings Financial
shares, and if certain other conditions to the consummation, including the
receipt of all required regulatory approvals, are satisfied or are waived,
on or before April 1, 1996, F&MHastings Financial will merge with and into BancorpFirst Financial in a transaction in
which the following will occur as of the Effective Time:
(a) TheEach of the then outstanding shares of F&MHastings Financial
Common Stock will be surrendered to BancorpFirst Financial in
consideration and exchange for Bancorp Common
Stock. The Deliverable Shares to which the holdersa number of F&Mshares of First
Financial Common Stock shall be entitled will be determined by dividing
$12,500,000 byequal to the Average Price.Exchange Ratio;
(b) F&MHastings Financial will merge with and into BancorpFirst Financial at
the Effective Time and BancorpFirst Financial will be the continuing,
surviving and resulting corporation in the Merger.
9
17Merger; and
(c) Farmers & MerchantsNational Bank of Hastings will merge with and into Indiana Lawrence,become a wholly owned
subsidiary of Bancorp, and Indiana Lawrence will
be the continuing, surviving and resulting corporation in the
Subsidiary Merger.First Financial.
9
17
On _______November __, 1996, the last trading date before the printing of the
Proxy Statement-Prospectus, the closing sales price of a share of BancorpFirst
Financial Common Stock equalled $______.$_____. If ________November __, 1996 were the Effective
Time, the Average Price would have been $_________,$________, the Deliverable SharesExchange Ratio would have
equaled _________ and the aggregate number of Bancorpshares of First Financial Common
Stock issued in exchange for all shares of F&MHastings Financial Common Stock would
have been _____________________. The market price and the Exchange Ratio would have equaled ______________
shares. The Average Price of BancorpFirst Financial Common
Stock on ________November __, 1996 isare presented for illustrative purposes only and may
not be indicative of the market price and Average Price at the Effective Time.
There were 5,63380,463 shares of F&MHastings Financial Common Stock outstanding
on _______November __, 19__.1996. See "DESCRIPTION OF THE MERGER--Structure Of The Merger"
and "--Effective Time Of The Merger," as well as the copy of the Merger
Agreement attached hereto as Appendix A.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The F&MHastings Financial Board
of Directors has unanimously approved the Merger Agreement and recommends that
shareholders vote FOR approval of the Merger Agreement. See "DESCRIPTION OF THE
MERGER--Background And Reasons For The Merger."
OPINION OF FINANCIAL ADVISOR TO F&M. Professional Bank Services, F&M'sHASTINGS FINANCIAL. Austin Associates,
Inc. ("AAI"), Hastings Financial's financial advisor, has rendered its opinion
to F&M'sHastings Financial's Board of Directors to the effect that, as of the date
the Merger Agreement was signed and as of such opinion, the Average Price anddate of this Proxy Statement-
Prospectus, the Exchange Ratio arewas fair, to
F&M's shareholders from a financial point of view.view, to
Hastings Financial's shareholders. A copy of Professional Bank
Services'AAI's fairness opinion is attached
hereto as Appendix B and should be read in its entirety for information with respect to
the qualificationsassumptions and assumptionsjustifications made and other matters considered and limitations on the reviews undertaken.considered. See
"DESCRIPTION OF THE MERGER--Opinion of Hastings Financial's Financial Advisor To F&M"Advisor."
RIGHTS OF APPRAISAL. Any shareholder of F&MHastings Financial who (1)
delivers before the shareholdersshareholders' vote a written notice of intent to demand
payment for such shareholder's shares in the manner provided by Indiana Code Chapter 23-1-44 and
whoMichigan
Business Corporations Act Section 450.1765, (2) does not vote in favor of the
approval of the Merger Agreement and (3) strictly complies with certain
procedures set forth in Sections 450.1762-450.1774, a copy of which is attached
hereto as Appendix C, shall be entitled, if and when the Merger becomes
effective, and upon strict compliance
with certain procedures set forth in Chapter 23-1-44, a copy of which is
attached hereto as Appendix C, to receive the value of the F&MHastings Financial Common Stock owned by
such shareholder at the time and in the manner set forth in Chapter
23-1-44.Sections
450.1762-450.1774. See "DESCRIPTION OF THE MERGER--Shareholders' Rights Ofof
Appraisal."
10
18
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS. It is anticipated that
the Merger will be a non-taxable reorganization for federal income tax purposes
and that no gain or loss for federal income tax purposes will be recognized by
the shareholders of F&MHastings Financial upon distribution to them of shares of
Bancorp.First Financial. A gain or loss may be recognized, however, on cash received in
place of fractional shares. Holders of F&MHastings Financial Common Stock, who
demand, in accordance with Chapter
23-1-44Section 450.1762 of the IndianaMichigan Business
Corporation Law,Corporations Act, to receive cash in exchange for the shares of F&MHastings
Financial Common Stock they actually own or are deemed by the Internal Revenue
Service ("IRS") to own constructively, will recognize a capital gain or loss on
the exchange. See "DESCRIPTION OF THE MERGER--Federal Income Tax Consequences Of
The Merger."
10
18
REPRESENTATIONS AND WARRANTIES. Both BancorpFirst Financial and F&MHastings
Financial have made certain representations and warranties in the Merger
Agreement. Such representations and warranties address, among others, certain
matters related to the organization, capital structure, financial statements and
the businesses of F&MHastings Financial and Bancorp.First Financial. They also specifically
discuss payment of dividends in the period prior to consummation as well as
default under material contracts. See the Merger Agreement attached as Appendix
A for a more detailed discussion.
REGULATORY APPROVALS AND OTHER CONDITIONS. The proposed Merger and
related transactions are subject to approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the Federal Deposit
Insurance Corporation (the "FDIC") and the Indiana Department of Financial
Institutions. Applications. An application requesting
approval werewas submitted to the Federal Reserve Board on __________________ __, 1995, to the FDIC on ___________ __, 1995 and to
the Indiana Department of Financial Institutions on _______ __, 1995.1996. There
can be no assurance that the approval of the Federal Reserve Board the FDIC or the
Indiana Department of Financial Institutions will be given
or whether conditions, if any, will be imposed on such approval. See
"DESCRIPTION OF THE MERGER--Regulatory Considerations."
The Merger is subject to numerous additional conditions, including, but
not limited to, approval of the Merger by F&MHastings Financial shareholders
holding at least a 75% majority of F&MHastings Financial Common Stock and the absence
of any material adverse changes in the corporate status, business, operations or
financial condition of BancorpFirst Financial of Hastings Financial since December 31, 1994 or of F&M since April 30,
1995. See "DESCRIPTION OF THE MERGER--Conditions To Consummation Of The Merger."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated at any time prior to the Effective Time by the mutual consent of the
Boards of Directors of F&MHastings Financial and Bancorp.First Financial. Either F&MHastings
Financial or BancorpFirst Financial may also terminate the Merger Agreement upon the
occurrence of certain events, such as not obtaining the requisite approval of
all required regulatory authorities or the shareholders of F&MHastings Financial or
not consummating the Merger on or before April 1, 1996.30, 1997. The Merger may also be
terminated by BancorpFirst Financial if the Average Price of BancorpFirst Financial Common Stock
falls below $28.48$27.625 per share or by F&MHastings Financial if the Average Price of BancorpFirst
Financial Common Stock exceeds $38.53$37.375 per share. See "DESCRIPTION OF THE
MERGER--Termination Of The Merger."
11
19
EFFECTIVE TIME. BancorpFirst Financial and F&MHastings Financial intend to
consummate the Merger on January 1, 1997 or as soon thereafter as practicable
after all required regulatory and shareholder approvals have been obtained and
the other conditions to consummation of the Merger have been satisfied. Bancorp and F&M are hopeful that all conditions prior to consummation
of the Merger will be satisfied so that the Merger can be consummated during the
first quarter of 1996. The
Merger Agreement provides that itthe Merger may be terminated by either party if
the Mergerit has not been consummated by April 1, 1996.30, 1997. See "DESCRIPTION OF THE MERGER--EffectiveMERGER--
Effective Time Of The Merger."
11
19
MARKET VALUE OF COMMON STOCK. The BancorpFirst Financial Common Stock is
traded in the over-the-counter market and is quoted by the Nasdaq National
Market System. On May 22, 1995,July 1, 1996, the last trading day prior to the first public
announcement of the proposed Merger, the closing sale price for a share of BancorpFirst
Financial Common Stock was $33.125$32.00 per share. Assuming the Merger was consummated
as of May 22, 1995,July 1, 1996, the Average Price would have been $33.453125,$32.568750, the Exchange Ratio
would have equaled 66.3336001333.815950 shares and the Deliverable Sharesaggregate number of Bancorpshares of First
Financial Common Stock issued in exchange for all shares of F&MHastings Financial
Common Stock would have been 373,657 shares and307,043 shares. Assuming the $32.00 per share
closing price for First Financial Common Stock on July 1, 1996, the equivalent
per share value (the closing price multiplied by the Exchange Ratio) of BancorpFirst
Financial Common Stock which would have been issued and exchanged for each
F&MHastings Financial share would have been $2,197.30.$122.11.
On September 24, 1996, First Financial's Board of Directors declared a
10% stock dividend to be distributed on November 1, 1996. The illustration above
has NOT been adjusted for any effects of the stock dividend on First Financial's
Average or market price per share. Assuming a 10% market price decrease for the
effect of the stock split, the adjusted Average would have been $29.311875, the
adjusted Exchange Ratio would have equaled 4.239945, the aggregate number of
shares of First Financial Common Stock issued in exchange for all shares of
Hastings Financial Common Stock would have been 341,159 shares and the
equivalent per share value of First Financial Common Stock which would have been
issued and exchanged for each Hastings Financial share would have remained
$122.11.
The market price, Average, adjusted market price and adjusted Average
Price on May 22, 1995July 1, 1996 are presented for illustrative purposes only and may not be
indicative of the market price and Average Price at the Effective Time.
F&MHastings Financial Common Stock is not actively traded in any
established market. See "COMPARATIVE MARKET AND DIVIDEND INFORMATION" for
additional market price information.
Other Possible Acquisition By First Financial
- ---------------------------------------------
As of the date of this Proxy Statement-Prospectus, First Financial had
entered into a definitive agreement of merger with Farmers State Bancorp,
Liberty, Indiana ("Farmers State"). The consideration to be paid to Farmers
State's shareholders pursuant to the merger agreement is fixed at $7,833.51 per
each share of Farmers State Bancorp common stock outstanding, payable in cash.
As of May 1, 1996, 967 shares of Farmers State Bancorp common stock were
outstanding, making the total consideration to be paid for all Farmers State
shares equal to approximately $7,575,000. After the merger, Farmers State Bank,
Farmers State's only subsidiary, will become a wholly owned subsidiary of First
Financial.
12
20
As of December 31, 1995, Farmers State had total assets of
approximately $63.6 million, loans outstanding of $41.8 million, total deposits
of $58.5 million and total shareholders' equity of $4.2 million. Its
equity-to-assets ratio at December 31, 1995 was 6.54%. Farmers State had net
earnings for the year ended December 31, 1995 of approximately $424,000 or
$438.83 per share. Information regarding the financial condition and operating
results of Farmers State is not included in the Pro Forma Financial Statements
because the acquisition of Farmers State is not anticipated to result in the
acquisition by First Financial of a significant subsidiary under applicable
regulations of the Exchange Act and is not anticipated to have a material effect
on the financial condition and results of operations of First Financial. See
"DESCRIPTION OF THE MERGER--Pro Forma Unaudited Financial Information."
The merger with Farmers State is subject to numerous conditions
including, among others, regulatory and shareholder approvals. First Financial
is unable to predict when or whether such conditions will be satisfied.
Accordingly, there can be no assurance that the proposed merger with Farmers
State will be consummated. Provided all conditions are met and approvals
obtained, the proposed merger with Farmers State is anticipated to be completed
during the fourth quarter of 1996.
Summary Of Selected Unaudited Financial Data And Per Share Data
- ---------------------------------------------------------------
The historical data presented on the following pages for BancorpFirst
Financial has been derived from its consolidated financial statements; see
"AVAILABLE INFORMATION--Documents Incorporated by Reference."
Bancorp has a December 31
fiscal year end while F&M has a fiscal year ending April 30. The historical data
for F&M presented on the following pages reflects the nine months ended
September 30 and the twelve months ended December 31 in order to be consistent
with Bancorp's year end and to aid comparability.
1213
2021
SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
NINESIX MONTHS ENDED
SEPTEMBERJUNE 30, YEARS ENDED DECEMBER 31,
-------- ------------------------
---------------------------------------------------------------1996 1995 19941995 1994 1993 1992 1991
1990
----------- ----------- ----------- ----------- ----------- ----------- --------------------- ---------- ---------- --------- --------
(Dollars in thousands, except per share data)
HASTINGS FINANCIAL (HISTORICAL) (1)
F&M (HISTORICAL) (1)
Net earnings (A) $ 471336 $ 545328 $ 700616 $ 563403 $ 598412 $ 466515 $ 389376
Total assets (period end) 59,966 60,158 62,993 65,118 63,236 61,861 54,79446,847 44,489 46,140 45,797 44,690 46,556 39,576
Long-term borrowings (period end) 0 0 0 0 0 0 0
Net earnings per share (A) 83.51 96.80 124.25 99.96 106.16 82.31 68.284.41 4.26 8.10 5.08 5.23 6.57 4.77
Dividends declared per share 30.00 26.00 26.00 26.00 26.00 26.00 27.501.25 0.00 2.25 1.75 1.65 1.65 1.65
Book value per share (period end) 1,384.55 1,292.93 1,320.43 1,247.32 1,173.36 1,093.21 1,027.9766.45 63.02 65.12 58.33 55.74 52.12 49.41
Average shares outstanding (B) 5,633 5,633 5,633 5,633 5,633 5,665 5,69776,130 76,915 76,036 79,249 78,883 78,530 78,781
Shares outstanding (period end) (B) 5,633 5,633 5,633 5,633 5,633 5,633 5,697
BANCORP79,463 75,463 75,463 78,367 78,367 78,367 78,367
FIRST FINANCIAL (HISTORICAL) (2)
Net earnings (A) $ 23,47516,871 $ 21,65715,358 $ 31,789 $ 28,173 $ 25,194 $ 21,770 $ 18,600
$ 14,053
Total assets (period end) 1,969,389 1,895,6182,175,381 1,911,687 2,103,375 1,922,643 1,810,673 1,816,414 1,860,955
1,631,481
Long-term borrowings (period end) 4,541 0 02,820 0 3,983 4,564 5,119 1,252
Net earnings per share (A) 1.91 1.771.28 1.26 2.55 2.31 2.06 1.77 1.51
1.13
Dividends declared per share 0.78 0.660.60 0.52 1.08 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 17.55 15.9018.59 16.97 17.99 15.95 14.85 13.66 12.44
11.60
Average shares outstanding (B) 12,311,609 12,213,20113,203,147 12,208,840 12,488,168 12,210,753 12,211,405 12,318,805 12,356,986 12,402,738
Shares outstanding (period end) (B) 12,568,641 12,204,57513,388,884 12,212,156 13,013,422 12,204,575 12,207,004 12,272,065 12,391,865
12,402,738
PRO FORMA BANCORPFIRST FINANCIAL AND F&MHASTINGS
FINANCIAL COMBINED ASSUMING 65.531671233.751871
EXCHANGE RATIO (3)
Net earnings (A) $ 23,94617,207 $ 22,20215,686 $ 28,87332,405 $ 25,75728,576 $ 22,36825,606 $ 19,06622,285 $ 14,44218,976
Net earnings per share (A) 1.89 1.76 2.301.27 1.25 2.53 2.28 2.05 1.761.77 1.50 1.13
Dividends declared per share:
Bancorp 0.78 0.66First Financial 0.60 0.52 1.08 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 17.65 16.01 16.07 14.97 13.79 12.57 11.7318.57 16.94 17.95 15.93 14.84 13.66 12.45
Average shares outstanding (B) 12,680,749 12,582,341 12,579,893 12,580,545 12,687,945 12,726,126 12,771,87813,505,034 12,510,727 12,790,055 12,512,640 12,513,292 12,620,692 12,658,873
Shares outstanding (period end) (B) 12,937,781 12,573,715 12,573,715 12,576,144 12,641,205 12,761,005 12,771,87813,690,771 12,514,043 13,315,309 12,506,462 12,508,891 12,573,952 12,693,752
PRO FORMA F&MHASTINGS FINANCIAL ONE SHARE
EQUIVALENT ASSUMING 65.531671233.751871 EXCHANGE
RATIO (4)
Net earnings per share (A) $ 123.854.76 $ 115.344.69 $ 150.729.49 $ 134.348.55 $ 115.347.69 $ 98.306.64 $ 74.055.63
Dividends declared per share 51.11 43.25 64.22 53.74 48.49 43.25 40.632.25 1.95 4.05 3.68 3.08 2.78 2.48
Book value per share 1,156.63 1,049.16 1,053.09 981.01 903.68 823.73 768.69
- --------------------69.67 63.56 67.35 59.77 55.68 51.25 46.71
- -----------
(A) Before cumulative effect of changes in accounting principles.
(B) Average and period end shares outstanding are not rounded to the nearest
thousand.
13
14
2122
SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
NINESIX MONTHS ENDED
SEPTEMBERJUNE 30, YEARS ENDED DECEMBER 31,
-------- ------------------------
---------------------------------------------------------------1996 1995 19941995 1994 1993 1992 1991
1990
----------- ----------- ----------- ----------- ----------- ----------- --------------------- ---------- ---------- ---------- ---------- ---------- --------
(Dollars in thousands, except per share data)
PRO FORMA FIRST FINANCIAL AND HASTINGS
FINANCIAL COMBINED ASSUMING 3.325237
EXCHANGE RATIO (5)
PRO FORMA BANCORP AND F&M COMBINED
ASSUMING 57.59320573 EXCHANGE RATIO (5)
Net earnings (A) $ 23,94617,207 $ 22,20215,686 $ 28,87332,405 $ 25,75728,576 $ 22,36825,606 $ 19,06622,285 $ 14,44218,976
Net earnings per share (A) 1.90 1.77 2.301.28 1.26 2.54 2.29 2.05 1.77 1.50 1.13
Dividends declared per share:
Bancorp 0.78 0.66First Financial 0.60 0.52 1.08 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 17.71 16.07 16.13 15.02 13.84 12.61 11.7718.61 16.99 18.00 15.97 14.88 13.69 12.48
Average shares outstanding (B) 12,636,032 12,537,624 12,535,176 12,535,828 12,643,228 12,681,409 12,727,16113,470,706 12,476,399 12,755,727 12,478,312 12,478,964 12,586,364 12,624,545
Shares outstanding (period end) (B) 12,893,064 12,528,998 12,528,998 12,531,427 12,596,488 12,716,288 12,727,16113,656,443 12,479,715 13,280,981 12,472,134 12,474,563 12,539,624 12,659,424
PRO FORMA F&MHASTINGS FINANCIAL ONE SHARE
EQUIVALENT ASSUMING 57.593205733.325237 EXCHANGE
RATIO (5)
Net earnings per share (A) $ 109.434.26 $ 101.944.19 $ 132.468.45 $ 118.077.61 $ 101.946.82 $ 86.395.89 $ 65.084.99
Dividends declared per share 44.92 38.01 56.44 47.23 42.62 38.01 35.712.00 1.73 3.59 3.26 2.73 2.46 2.19
Book value per share 1,019.98 925.52 928.98 865.05 797.09 726.25 677.8761.88 56.50 59.85 53.10 49.48 45.52 41.50
PRO FORMA BANCORPFIRST FINANCIAL AND F&MHASTINGS
FINANCIAL COMBINED ASSUMING 77.916650874.498850
EXCHANGE RATIO (6)
Net earnings (A) $ 23,94617,207 $ 22,20215,686 $ 28,87332,405 $ 25,75728,576 $ 22,36825,606 $ 19,06622,285 $ 14,44218,976
Net earnings per share (A) 1.88 1.75 2.281.27 1.25 2.52 2.27 2.04 1.751.76 1.49 1.12
Dividends declared per share:
Bancorp 0.78 0.66First Financial 0.60 0.52 1.08 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 17.56 15.92 15.98 14.89 13.71 12.50 11.6618.48 16.86 17.87 15.85 14.77 13.59 12.39
Average shares outstanding (B) 12,750,513 12,652,105 12,649,657 12,650,309 12,757,709 12,795,890 12,841,64213,565,138 12,570,831 12,850,159 12,572,744 12,573,396 12,680,796 12,718,977
Shares outstanding (period end) (B) 13,007,545 12,643,479 12,643,479 12,645,908 12,710,969 12,830,769 12,841,64213,750,875 12,574,147 13,375,413 12,566,566 12,568,995 12,634,056 12,753,856
PRO FORMA F&MHASTINGS FINANCIAL ONE SHARE
EQUIVALENT ASSUMING 77.916650874.498850 EXCHANGE
RATIO (6)
Net earnings per share (A) $ 146.485.71 $ 136.355.62 $ 177.6511.34 $ 158.9510.21 $ 136.359.18 $ 116.107.92 $ 87.276.70
Dividends declared per share 60.77 51.42 76.36 63.89 57.66 51.42 48.312.70 2.34 4.86 4.41 3.69 3.33 2.97
Book value per share 1,368.22 1,240.43 1,245.11 1,160.18 1,068.24 973.96 908.51
- --------------------83.14 75.85 80.39 71.31 66.45 61.14 55.74
- --------------
(A) Before cumulative effect of changes in accounting principles.
(B) Average and period end shares outstanding are not rounded to the nearest
thousand.
14
15
2223
NOTES TO SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
--------------------------------------------------------------------------
(1) Earnings per share is calculated by dividing net earnings for the
period by the average number of common shares outstanding for the
period. Book value per share is calculated by dividing total
shareholders' equity at the end of the period by the number of shares
outstanding at the end of the period.
(2) Dividend information on Bancorp'sFirst Financial's subsidiaries which have
merged with BancorpFirst Financial under the pooling-of-interests method after
January 1, 1989,1991 has not been recalculated or added to Bancorp'sFirst Financial's
historical dividend information. BancorpFirst Financial has adjusted
historical information to reflect the issuance of stock splits. The
shares outstanding data has been adjusted to reflect treasury stock
transactions.
(3) The PRO FORMA BANCORPFIRST FINANCIAL AND F&MHASTINGS FINANCIAL COMBINED reflects
the combined results of BancorpFirst Financial and F&MHastings Financial after
giving effect to the pooling-of-interests method of accounting. For
illustrative purposes, the combined results assume the merger was
consummated on January 1, 1990.1991.
The per share data, average shares outstanding and shares outstanding
(period end) were calculated assuming the issuance of 369,140
Deliverable Shares301,887 shares of
BancorpFirst Financial Common Stock at an Average equal to $33.8625,$33.125, which is
the Average that would have been in effect if the Merger was effective
October 31, 1995 (65.53167123September 3, 1996 (3.751871 Exchange Ratio).
The number of BancorpFirst Financial shares to be issued at consummation is
dependent on the Average Price at that time and cannot be determined before
that date. The pro forma financial results included in this table are
for illustrative purposes only.
(4) The Deliverable Shares to which F&M shareholders shall be entitled as a
resultUpon consummation of the Merger, shalleach Hastings Financial shareholder
will be determinedto entitled to receive First Financial shares equal to the
total number of shares of Hastings Financial Common Stock owned by dividing $12,500,000such
shareholder multiplied by the Average Price. InExchange Ratio. The Exchange Ratio will
be appropriately adjusted in the event of the subdivision or split of
the outstanding Bancorp shares, the payment of a dividend in Bancorp shares
orFirst Financial Common Stock, a capital reorganization,
or a reclassification or recapitalization affecting First Financial
Common Stock.
Since the closing price for Bancorp
shares during some but not all of said trading days, the number of
Deliverable Shares will be adjusted proportionately so that the holders
of outstanding F&M shares shall receive the number of Bancorp shares
that represents the same percentage of the value of outstanding Bancorp
shares at the Effective Time as would have been represented by the
number of shares such shareholders would have received if the event had
not occurred. The Exchange Ratio is determined by dividing the number
of Deliverable Shares by the number of F&M shares outstanding and
represents the number of shares of Bancorp Common Stock that each share
of F&M Common Stock will be exchanged for at the Effective Time.
Since the Deliverable Shares is not determinable at the printing of this
Proxy Statement-Prospectus, F&M'sHastings Financial's one share equivalent
pro forma net earnings, dividends and book value per share, calculated
assuming an Exchange Ratio of 65.531671233.751871 shares, are shown for
illustrative purposes only.
1516
2324
(5) The Merger may be terminated by F&MHastings Financial if the Average
Price of Bancorp
Common Stock exceeds $38.53.$37.375. If the Average Price at the Effective Time is $38.53,$37.375, the
Deliverable SharesExchange Ratio will be 3.325237 shares and the aggregate number of
Bancorpshares of First Financial Common Stock issued in exchange for all
shares of F&MHastings Financial Common Stock will be 324,423 shares and
the Exchange Ratio will be 57.59320573267,559 shares. The
Deliverable Sharesnumber of First Financial shares to be issued at consummation is
dependent on the Average Price at the Effective Time and cannot be determined
before that timedate. The pro forma financial results assuming an Average
of $37.375 are for illustrative purposes only.
(6) The Merger may be terminated by First Financial if the Average is less
than $27.625. If the Average at the Effective Time is $27.625, the
Exchange Ratio will be 4.498850 shares and the aggregate number of
shares of First Financial Common Stock issued in exchange for all
shares of Hastings Financial Common Stock will be 361,991 shares. The
number of First Financial shares to be issued at consummation is
dependent on the Average at the Effective Time and cannot be determined
before that date. The pro forma financial results assuming an Average
Price of $38.53$27.625 are for illustrative purposes only.
(6) The Merger may be terminated by Bancorp if the Average Price of Bancorp
Common Stock is less than $28.48. If the Average Price at the Effective
Time is $28.48, the Deliverable Shares of Bancorp Common Stock issued
in exchange for all shares of F&M Common Stock will be 438,904 shares
and the Exchange Ratio will be 77.91665087 shares. The Deliverable
Shares to be issued at consummation is dependent on the Average Price
at that time and cannot be determined before that date. The pro forma
financial results assuming an Average Price of $28.48 are for
illustrative purposes only.
1617
2425
DESCRIPTION OF THE MERGER
This section of the Proxy Statement-Prospectus describes certain of the
more important aspects of the Merger. The following description does not purport
to be complete and is qualified in its entirety by reference to the Merger
Agreement which is set forth in Appendix A to this Proxy Statement-Prospectus.
All shareholders are urged to read the Merger Agreement in its entirety.
Background And Reasons For The Merger
Culminating in late 1994 and early 1995, the F&M- -------------------------------------
On January 15, 1996, Hastings Financial's Board of Directors obtainedengaged
Austin Associates, Inc. ("AAI"), a better understandingconsulting and investment banking firm of
Toledo, Ohio, to explore the possibility of enhancing shareholder value through
affiliation with a regional bank holding company. After performing an initial
analysis and review, contact was made with 24 potentially interested
institutions. After providing confidential information on Hastings Financial,
eleven proposals were received, including First Financial's. Hastings
Financial's Board of Directors determined that First Financial's proposal
presented the best opportunity for enhancing shareholder value. After an
exchange of additional information and preliminary negotiations, First Financial
and Hastings Financial entered into the Merger Agreement with regard to the
Merger on July 2, 1996, following approval of the changedMerger Agreement by their
respective boards of directors. First Financial's management and changing environment in which
a community bank operates. The opportunitiesHastings
Financial's management and challenges facing a community
bank centered in Fulton County, Indiana came into sharper perspective as a
resultBoard of Directors, and their respective
representatives, negotiated the Merger Price and other terms of the Board's strategic thinking aboutMerger
Agreement on an arm's-length basis.
Among other items considered in the futuredecision to accept the First
Financial proposal were the prospects for Hastings Financial and First Financial
as separate institutions and combined; the anticipated tax-free nature of Farmers & Merchants
Bank. It became apparentthe
merger to the Board that (i)shareholders of Hastings Financial receiving solely First
Financial common stock in exchange for their shares of Hastings Financial common
stock; the regulatory burden every
commercial bank faces imposesincreased liquidity since First Financial is traded in the
over-the-counter market and its share prices reported on the Nasdaq National
Market System; the timeliness of a special hardship on a community bank that is not
operating at a scale to permit it to efficiently spreadmerger given the costsstate of developmentthe economy, the
competitive nature of the banking industry and implementation of compliance systems across a large base of revenues; (ii)
technological advances in financial products and servicesthe stock market, as well as
anticipated trends; increased regulatory requirements on banks in internalgeneral and
Hastings Financial; relevant price information involving recent comparable bank
systems can be exploited more efficiently by a larger institution;acquisitions which occurred in Michigan, the Midwest and (iii) increased competition resulting from newthe United States; and
bigger financial services
competitors negatively affects the potential for growthan analysis of a community bank. The
cumulative effect of these and other factors on creating value for F&M's
shareholders weighed heavily in favor of changing F&M's historic course of
remaining independent.
With these and other factors in mind, in March 1995, the F&M Board of
Directors formed a Research Committee and charged italternatives to Hastings Financial merging with the responsibility to
investigate possible affiliationsFirst Financial,
including pursuing mergers with other financial institutions. From time
to time, F&M had received various unsolicited indications of interest in
possible affiliations with larger financial institutions in northern Indiana.
The Research Committee began discussions in earnest with such institutions, as
well as with other institutions that were determined to have a present interest
in an affiliation with F&M, provided that such financial institutions also met
the criteria the Board and the Committee developed for an attractive merger
partner, described below.
As a part of its deliberations in March 1995,interested acquirors. In addition, the
Board of Directors considered the opinion of F&M reaffirmed its commitmentAAI indicating that the
consideration to its various constituencies, includingbe received by Hastings Financial shareholders under the Merger
Agreement was fair from a financial point of view.
18
26
The Board of Directors of Hastings Financial also considered the impact
of the Merger on Hastings Financial's and National Bank of Hastings' customers
and employees and the communities served by Farmers &
MerchantsNational Bank especially Rochesterof Hastings (the
"Bank"). First Financial's historical practice of retaining employees of
acquired institutions and Kewanna,its competitive salary and benefit programs were
considered, as was the opportunity for training, education, growth and
advancement of the Bank's employees within First Financial or one of its
subsidiaries. The Board especially
desiredof Directors of Hastings Financial examined First
Financial's continuing commitment to maximize value to shareholders. As a resultthe communities served by institutions
previously acquired by First Financial. Further, from the standpoint of these considerations,the
Bank's customers, it was anticipated that more products and services would
become available because of First Financial's greater resources.
Based upon the foregoing factors, the Board of Directors of F&M developed some criteriaHastings
Financial concluded that it was advantageous to use as a framework for
analysis in considering any merger partner, including the following:
(a) An attractive price,merge with a clear preference for F&M
shareholders having the ability to receive a merger partner's
stock in a transaction structured to be tax-free to F&M
shareholders who receive stock;
17
25
(b)First Financial. The
likely continuationimportance of the essential naturevarious factors relative to one another cannot be precisely
determined or stated.
Opinion of the services
offered by Farmers & Merchants Bank in Rochester and Kewanna;
(c) Liquidity, through the ownership of the merger partner's stock
as comparedFinancial Advisor to F&M stock; and
(d) The avoidance of undue disruption of the lives of the employees
of Farmers & Merchants Bank.
In March and April 1995, the Research Committee met with
representatives of five financial institutions, some of whom had previously
expressed an interest inHastings Financial
- --------------------------------------------------
AAI is a merger with F&M and others whose interest developed
for the first time. In April, four institutions, who were regarded preliminarily
as potentially acceptable merger partners and who had such interest in F&M that
they had visited the main office of Farmers & Merchants Bank to conduct "due
diligence" regarding the conditions and prospects of F&M, were advised in a
letter from F&M as to F&M's desires with respect to each institution submitting
an offer containing the essential terms and conditions of an acquisition. Of the
four interested parties who received a letter from F&M to such effect, all four
submitted offers by the May 1 deadline.
Following receipt of the four offers, the Research Committee proceeded
to analyze the offers. The Research Committee decided to retain therecognized investment banking firm of David A. Noyes & Company, which possesses expertise with respect
to valuation of banks and bank holding companies, for the purpose of having that
firm share with the F&M Board its analysis of the offers from the perspective of
the shareholders of F&M. David A. Noyes & Company independently prepared
analyses of the offers. These analyses were reviewed by the Research Committee
and then by the F&M Board at a meeting held May 17, 1995.
Two of the four offers included a price expressed as a number of shares
of the acquiring corporation to be received by the shareholders of F&M
determined on the basis of the average trading price for the offeror's shares
during a trading period preceding the closing date. Two other offers used a
different approach to determining the number of shares to be exchanged for the
5,633 outstanding shares of F&M. The offer from Bancorp provided for the largest
amount of consideration to be paid to shareholders of F&M, and provided for the
highest equivalent dividend per share. The offer from Bancorp compared favorably
to other offers under the other criteria set forth above. Accordingly, the Board
authorized and directed the Research Committee (renamed the Merger Committee) to
negotiate with Bancorp the terms and conditions of a definitive agreement and to
submit any such definitive agreement to the F&M Board for its approval. On May
19, 1995, F&M and Bancorp signed a non-binding letter of intent to merge, which
was announced in a news release shortly thereafter. As a matter of information
to its shareholders, F&M mentioned the proposed transaction in the May 23, 1995
letter to F&M shareholders that transmitted the notice of the annual
shareholders meeting held June 20, 1995 and the related proxy statement and form
of proxy for such meeting.
18
26
Beginning in June 1995 and continuing for the next few months, F&M and
Bancorp negotiated the terms and conditions of the definitive agreement. The
Merger Committee and Board of Directors of F&M took action to retain the
services of Professional Banking Services, Inc. ("PBS"), an investment banking
firm, to provide a letter expressing its opinion as to the fairness to F&M's
shareholders from a financial point of view of the terms of any definitive
agreement (the "Fairness Opinion"). It was anticipated that the Fairness Opinion
would be delivered subsequent to the execution of a definitive agreement and
also after PBS had the opportunity to conduct a "due diligence" investigation of
Bancorp. Nevertheless, PBS reviewed drafts of the definitive agreement and
participated in related discussions and meetings, including the special meeting
of the Board of Directors of F&M held August 30, 1995.
At the August 30 Board meeting, the definitive agreement, entitled
"Plan and Agreement of Merger" was discussed in detail. Having concluded that
affiliating with Bancorp and executing and delivering the definitive agreement
were in the best interests of F&M and its shareholders, the F&M Board of
Directors unanimously approved the definitive agreement and authorized and
directed William J. Gordon, as President of F&M, to execute and deliver it after
certain conditions were met. Mr. Gordon did so on September 11, 1995.
Opinion Of Financial Advisor To F&M
PBS was engaged by F&M to advise the Board of Directors as to the
fairness of the consideration, from a financial perspective, to be paid by
Bancorp to shareholders as set forth in the Merger Agreement between Bancorp and
F&M. PBS is a bank consulting firm with offices in Louisville, Nashville,
Indianapolis, Washington, D.C. and Ocala, Florida. As part of its investment
banking business, PBS is regularly engaged in reviewing the fairness of
financial institution acquisition transactions from a financial perspective and in the
valuation of financial institutions and other businesses and their securities in
connection with mergers and acquisitions and for estate, settlementscorporate and other
transactions. Neither PBS nor any of its affiliates has a materialpurposes. Hastings Financial selected AAI to act as Hastings Financial's
financial interest in F&M or Bancorp. PBS was selected to advise the F&M Board
of Directors based upon its familiarity with Indiana financial institutions and
its knowledge of the financial industry as a whole.
PBS performed certain analyses described below and discussed the range
of values for F&M resulting from such analyses with the Board of Directors of
F&Madvisor in connection with the Merger on the basis of its advice as to the fairness of the consideration to be
paid by Bancorp.
An oral Fairness Opinion ("Opinion") of PBS was deliveredreputation
and qualifications in evaluating financial institutions.
AAI has rendered a separate written opinion to the Board of Directors
of F&M on August 30, 1995 at a special meetingHastings Financial to the effect that the terms of the BoardMerger are fair from a
financial point of Directors.view to the shareholders of Hastings Financial as of the date
of the opinion. AAI based its opinion upon, among other things: (1) a comparison
of the financial statements and other financial information concerning Hastings
Financial and First Financial set forth or incorporated by reference in this
Proxy Statement-Prospectus; (2) certain other financial information concerning
Hastings Financial, including, but not limited to, operating budgets, board of
directors reports and loan loss reserve adequacy reports; (3) financial and
share price data of Hastings Financial, First Financial, and comparable banking
organizations; (4) the financial terms, to the extent publicly available, of
certain comparable transactions; (5) the terms of certain other proposals
received by Hastings Financial from other banking institutions; and (6)
discussions with the management of Hastings Financial and First Financial.
No limitations were imposed on the scope of AAI's investigation. AAI
participated in the negotiation of the terms of the Merger Agreement and other
related agreements associated with the Merger. The terms of the Merger
Agreement, including the Merger Price, were negotiated by the boards of
directors of Hastings Financial and First Financial, and their representatives,
on an arm's-length basis. A copy of the Opinion, which includes a summary of the assumptions
made and information analyzed in deriving the Fairness Opinion,fairness opinion is attached as Appendix
CB to this Proxy Statement-Prospectus and should be read in its entirety.
19
27
In arriving at its Opinion, PBS reviewed certain publicly available
business and financial information relating to F&M and Bancorp. PBS considered
certain financial and stock market data of F&M and Bancorp, compared that data
with similar data for certain other private and publicly-held bank holding
companies which own Indiana financial institutions and considered the financial
terms of certain other comparable Indiana commercial bank transactions that had
recently been effected. PBS also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
that it deemed relevant. In connection with its review, PBS did not
independently verify the foregoing information and relied on such information as
being complete and accurate in all material respects. PBS did not make an
independent evaluation or appraisal of the assets of F&M or Bancorp.
As part of preparing the Opinion, PBS performed a due diligence review
of Bancorp and its affiliate banks. As part of the due diligence, PBS reviewed
minutes of Board of Directors meetings beginning January 1994 through June 1995;
audited financial statements for the years ended December 31, 1992, 1993 and
1994; 1995 First and Second Quarter Reports to Shareholders; management letters
from independent auditors for 1992, 1993 and 1994 and management's responses
thereto; operating policies; overdraft and past due reports; Uniform Bank
Performance Reports; investment security holdings; listing of pending
litigation; internal audit and loan review reports; and the corporate business
plan.
PBS also interviewed senior management of Bancorp regarding operations,
performance and the future prospects of Bancorp. PBS compared the historical
common stock market of financial institutions headquartered in Indiana to
Bancorp.
PBS reviewed and analyzed the historical performance of F&M and its
wholly owned subsidiary, Farmers & Merchants, contained in: F&M Audited
Financial Statements for the years ended April 30, 1995; Form FRY-9SP as filed
by F&M with the Federal Reserve as of June 30, 1995; the June 30, 1995
Consolidated Reports of Condition and Income filed with the FDIC by Farmers &
Merchants; and the December 31, 1994 and March 31, 1995 Uniform Bank Performance
Reports of Farmers & Merchants. PBS also reviewed and analyzed the historical
common stock trading activity of F&M and the premises and other fixed assets.
PBS reviewed and tabulated statistical data regarding the loan portfolio,
securities portfolio and other performance ratios and statistics. Financial
projections were analyzed as well as other financial studies, analyses and
investigations as deemed relevant for the purposes of this Opinion. In review of
the aforementioned information, PBS took into account its assessment of general
market and financial conditions, its experience in other transactions and its
knowledge of the banking industry generally.
In connection with rendering the Opinion and preparing its various
written and oral presentations to F&M's Board of Directors, PBSopinion, AAI performed a variety of
financial analyses, including thosewhich are summarized below. The summary set
forth below does not purport to be a complete description of theAAI believes its analyses
performed by PBS in this regard. The preparation of an Opinion involves various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
20
28
description. Accordingly, notwithstanding the separate factors summarized below,
PBS believes that its analysis must
be considered as a whole and that selecting portions of itssuch analyses and of the
factors considered by it,therein, without considering all analysesfactors and factors,analyses, could
create an incomplete view of the evaluationanalyses and the process underlying itsAAI's
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analyses or
summary description. In performing its analyses, PBSAAI made numerous assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which are beyond F&M'sHastings Financial's or Bancorp'sFirst Financial's control. TheAny
estimates contained in AAI's analyses performed by PBS are not necessarily indicative of actual
values or future
results or values, which may be significantly more or less favorable than suggested by such analysis. In addition, analyses relatingthe
estimates.
PRELIMINARY APPRAISAL OF HASTINGS FINANCIAL. AAI completed a
preliminary appraisal of Hastings Financial which was presented to the valuesBoard of
businesses do not purportDirectors of Hastings Financial in February of 1996. AAI estimated that a
reasonable sale of control value for Hastings Financial would range between $8.8
and $9.1 million, or approximately $116-$120 per share.
THE PROCESS FOR SOLICITING INDICATIONS OF INTEREST FROM OTHER BANKING
COMPANIES. Through AAI, Hastings Financial contacted 24 commercial banking
organizations, that were selected by the Hastings Financial Board of Directors
after consultation with AAI, to be appraisals norassess their interest in acquiring Hastings
Financial. Of the 24 organizations contacted, 17 requested confidential
information packages which provided detailed information regarding the business
and operations of Hastings Financial. AAI pursued discussions with each
organization that had requested the confidential information. Eventually 11
organizations submitted proposals to reflectacquire Hastings Financial. The Hastings
Financial Board of Directors selected the process by which
businesses actually may be sold.
ACQUISITION COMPARISONFirst Financial proposal after
extensive deliberation and negotiation.
COMPARATIVE PRICE ANALYSIS. In performing this analysis, PBSdetermining whether the price offered by
First Financial for Hastings Financial was fair, from a financial point of view,
to the shareholders of Hastings Financial, AAI reviewed 171 Indiana bank acquisitiona comparison of prices
paid in sale of control transactions in Michigan for banks having assets of up
to $150 million. AAI looked specifically at ten transactions announced since 1985.between
1993 and 1996 involving Michigan-based sellers. The purpose of the analysis wasten transactions had an
average price to obtain an evaluation range based on these Indiana
acquisition transactions. Multiples of earnings and book value implied by the
comparable transactions were utilized in obtainingratio of 169% and a range for the acquisition
valueprice to earnings multiple of
F&M. In addition to reviewing recent Indiana bank transactions, PBS
performed separate comparable analyses for acquisitions of Indiana banks which,
like F&M, had an equity-to-asset ratio above 11%, those located in non-MSA areas
and those with deposits between $25 and $75 million. Values for the 171 Indiana
bank acquisitions expressed as multiples of both book value and earnings were
1.45x and 14.42x, respectively.21.6. The median multiples were 154% of book value and earnings
for acquisitions of Indiana banks with equity-to-asset ratios above 11% were
1.41x and 15.52x, respectively.15.8 times earnings. The
median multiples of book value and earnings
for acquisitions of Indiana banks located in non-MSA areas were 1.40x and
13.89x, respectively. The median multiples of book value and earnings for those
institutions with total deposits between $25 and $75 million were 1.42x and
13.12x, respectively. Themarket value of the transaction equals $2,219.07 per F&M
common share. This represents a multiple of book value and a multiple of
earnings, as of June 30, 1995, of 1.67x and 18.44x, respectively.
ADJUSTED NET ASSET VALUE ANALYSIS. For analysis purposes only, PBS
reviewed F&M's balance sheet data to determine the amount of material
adjustments that would be required to stockholders' equity if F&M's assets were
adjusted to market value. PBS determined that two adjustments were warranted.
The investment securities portfolio had depreciation of approximately $374,000
after adjustment for income taxes. PBS also determined a value of the
non-interest bearing deposits of approximately $1,847,000. The adjusted net
asset value, as of June 30, 1995, was determined to be $1,593.11 per share of
F&M's common stock.
DISCOUNTED EARNINGS ANALYSIS. A dividend discount analysis was
performed by PBS pursuant to which a range of stand-alone values of F&M was
determined by adding (i) the present value of estimated future dividend streams
that F&M could generate over a five-year period beginning in 1996 and ending in
2000, and (ii) the present value of the "terminal value" of F&M's common equity
at the end of 2000. The "terminal value" of F&M's common equity at the end of
the five-year period was determined by applying a multiple of 1.45 times the
projected terminal year's book value. The 1.45 multiple represents the median
price paid as a multiple of book value for all Indiana banks since 1989.
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29
Dividend streams and terminal values were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of F&M Common Stock. The value of
F&M, determined by adding the present value of the total cash flows, was
$1,668.17 per F&M share. In addition, using the five-year projection as a base,
a 20-year projection was prepared assuming an annual growth rate of 7% and a
return on assets of 1.15% by year five and remaining at this level for the
entire period, beginning in 2000. Dividends also were assumed to be 50% of
income for all years. This long-term projection resulted in a value of $1,424.32
per F&M share.
SPECIFIC ACQUISITION ANALYSIS. For analysis purposes only, PBS valued
F&M based on an acquisition analysis assuming a "break-even" earnings scenario
to an acquirer as to price, current interest rates and amortization of the
premium paid. Based on this analysis, an acquiring institution would pay
$1,750.58 per share of F&M Common Stock, assuming they were willing to accept no
impact to their net income in the initial year. This analysis was based on a
funding cost of 8% adjusted for taxes, amortization of the acquisition premium
over 15 years and a projected earnings level for F&M of $678,000 in 1995.
PRO FORMA MERGER ANALYSIS. PBS compared the historical performance of
F&M to that of Bancorp and other regional bank holding companies. This included,
among other things, a comparison of profitability, asset quality and capital
adequacy measures. In addition, the contribution of each of F&M and Bancorp to
the income statement and balance sheet of the pro forma combined company was
analyzed.
The effect of the affiliation on the historical and pro forma financial
data of F&M, as well as the projected financial data prepared by PBS, was
analyzed. F&M's historical financial data was compared to pro forma combined
historical and projected earnings and book value per share as well as other
measures of profitability, capital adequacy and asset quality.
CONCLUSION. The Fairness Opinion is directed only to the question of
whether the consideration to be received by F&M'sHastings Financial
shareholders underin the Merger is fixed at $10.0 million, subject to certain
adjustments, which approximates 189% of Hastings Financial's book value at June
30, 1996, and 16.0 times Hastings Financial's consolidated net income for the 12
months ended June 30, 1996.
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28
CONTRIBUTION ANALYSIS. AAI compared the pro forma ownership interest in
First Financial that Hastings Financial shareholders would receive, in the
aggregate, to the contribution by Hastings Financial to the total assets, equity
and net income in the combined organization. Assuming a June 30, 1996 Closing
date for the Merger, Hastings Financial shareholders would own approximately
2.24% of First Financial on a pro forma basis. Hastings Financial's contribution
of total assets would equal 2.11%, the contribution of total equity would equal
2.08%, and the contribution of year-to-date 1996 net income would have equaled
1.95%.
DILUTION ANALYSIS. AAI also reviewed the pro forma effect of the Merger
to Hastings Financial's and First Financial's earnings per share and book value
per share. Hastings Financial recorded earnings per share of $4.41 and a book
value of $66.45 per share as of June 30, 1996. Giving effect to the Merger
through June 30, 1996, the equivalent Hastings Financial earnings per share
would have equaled $4.86, an increase of 10.20% over actual results. Book value
per share would have increased to $70.80 per share, an increase of 6.55% over
the actual book value of $66.45. Giving effect to the Merger, First Financial's
book value per share would have been diluted by $0.04 or 0.22% and earnings per
share would have been diluted by $0.01 or 0.78%.
DIVIDENDS. AAI reviewed the current cash dividends paid by Hastings
Financial and First Financial. Based on an exchange ratio of 3.815950 First
Financial shares for each of Hastings Financial, equivalent dividends to
Hastings Financial shareholders would have been $4.12 per share in 1995, an 83%
increase over actual dividends received by Hastings Financial shareholders. For
the first six months of 1996 equivalent dividends to Hastings Financial
shareholders would have been $2.29 per share, also representing an 83% increase
over actual dividends received.
The summary set forth above does not purport to be a complete
description of the analyses performed by AAI. Further, AAI did not conduct a
physical inspection of any of the properties or assets of Hastings Financial or
First Financial. AAI has assumed and relied upon the accuracy and completeness
of the financial and other information provided to it or publicly available, has
relied upon the representations and warranties of Hastings Financial and First
Financial made pursuant to the Merger Agreement, is fair and equitable fromhas not independently
attempted to verify any of such information. AAI has also assumed that the
conditions to the Merger as set forth in the Merger Agreement would be satisfied
and that the Merger would be consummated on a financial perspective and does not
constitute a recommendation to any F&M shareholder to votetimely basis in favor ofthe manner
contemplated by the Merger Agreement. No limitations were imposed by Hastings
Financial or First Financial upon AAI on PBS regarding the scope of its investigation or otherwise by F&M or Bancorp ornor were
any of its affiliates.
Based on the results of the various analyses described above, PBS
concluded that the considerationspecific instructions given to be received by F&M shareholders under the
Merger Agreement is fair and equitable from a financial perspective to the
shareholders of F&M.
PBS will receive a fee not to exceed $15,000 from F&M for all of its
services performedAAI in connection with renderingits fairness opinion.
For AAI's services as financial advisor, Hastings Financial will pay
the Opinion.firm a fee of $15,000, plus a contingent amount equal to 1.0% of the
transaction value when the Merger is consummated. Hastings Financial estimates
that total fees under this arrangement will be $115,000. In addition, F&MHastings
Financial has agreed to reimburse AAI for reasonable out-of-pocket expenses and
indemnify PBS and its directors, officers and employees from
liability in connectionAAI against certain liabilities, including liabilities under the
securities laws. AAI has no other material relationship with the Merger and to hold PBS harmless from any
losses, actions, claims, damages, expenses or liabilities related to any of PBS's actsthe parties
to the merger or decisions made in good faith and in the best interest of F&M.
22their affiliates.
21
3029
Structure Of The Merger
- -----------------------
If the Merger is approved by F&MHastings Financial shareholders at the
Special Meeting by at least a 75% majority vote of the outstanding shares of
F&MHastings Financial Common Stock and if necessary regulatory approvals are
received and certain other conditions to the consummation of the transactions
contemplated by the Merger Agreement are satisfied or waived, prior to April 1, 1996, F&MHastings Financial
will merge with Bancorpand into First Financial in a transaction in which the following
will occur at the Effective Time:
(a) AllEach of the then outstanding shares of F&MHastings Financial will
be canceled and extinguished in consideration and exchange for
a number of shares of BancorpFirst Financial Common Stock determined by dividing
$12,500,000 byequal to
the Average Price.Exchange Ratio;
(b) F&MHastings Financial will merge with and into BancorpFirst Financial at
the Effective Time and BancorpFirst Financial will be the continuing,
surviving and resulting corporation in the Merger.Merger; and
(c) Farmers & MerchantsNational Bank of Hastings will merge with and into Indiana Lawrence,become a wholly owned
subsidiary of Bancorp, and Indiana Lawrence will
be the continuing, surviving and resulting corporation in the
Subsidiary Merger.
Deliverable Shares
The Deliverable Shares to which F&M shareholders shall be entitled as a
result of the Merger shall be determined by dividing $12,500,000 by the Average
Price. In the event of the subdivision or split of the outstanding Bancorp
shares, the payment of a dividend in Bancorp shares or a capital reorganization
affecting the closing price for Bancorp shares during some but not all of said
trading days, the number of Deliverable Shares will be adjusted proportionately
so that the holders of outstanding F&M shares shall receive the number of
Bancorp shares that represents the same percentage of the value of outstanding
Bancorp shares at the Effective Time as would have been represented by the
number of shares such shareholders would have received if the event had not
occurred. Each holder of F&M shares shall be entitled to a portion of the
Deliverable Shares that is equal to the number of Deliverable Shares multiplied
by a fraction, the numerator of which is the number of F&M shares held by that
shareholder immediately prior to the Effective Time and the denominator of which
is the number of F&M shares outstanding immediately prior to the Effective Time.
23
31First Financial.
Surrender Of Stock Certificates
Prior to- -------------------------------
The Merger Agreement provides for the Effective Time, Bancorp andsurrender of Hastings Financial
Common Stock certificates by the holders thereof before such holders may receive
certificates evidencing First Financial Common Stock. First National Bank of
Southwestern Ohio, (the "Exchange Agent"),Butler County, Ohio, a wholly owned subsidiary of Bancorp,
shall enter into an Exchange AgentFirst
Financial, will act as the exchange agent (the "Exchange Agent"). Approval of
the Merger Agreement with respect toby Hastings Financial shareholders will constitute
ratification of the Deliverable
Shares, which Agreement shall be subject to F&M's approval which shall not be
unreasonably withheld. The Exchange Agent Agreement shall require Bancorp to
deliverselection of First National Bank of Southwestern Ohio as the
Deliverable Shares to the Exchange Agent at the Effective Time.exchange agent.
As promptlysoon as practicable after the Effective Time, the Exchange Agent
shall prepare and mail to each holder of record of an outstanding certificate or
certificates representing shares of F&MHastings Financial a letter of transmittal
containing instructions for the surrender of the certificate or certificates.
Upon surrender of the F&MHastings Financial certificate or certificates in
accordance with instructions set forth in the letter of transmittal, such holder
shall be entitled to receive in exchange therefor certificates representing the
number of whole shares of BancorpFirst Financial into which the shares represented by
the certificate or certificates so surrendered shall have been converted,
without interest.
As part of its
services, the Exchange Agent shall make itself available for at least three
business days during regular banking hours at the main office of Farmers &
Merchants to accept and provide receipts for surrendered certificates.
Approval of the Exchange Agent Agreement by F&M and approval of the
Merger Agreement by the shareholders of F&M shall constitute ratification of the
appointment of First National Bank of Southwestern Ohio as the Exchange Agent
for this purpose.22
30
The Exchange Agent shall not be obligated to deliver certificates for
BancorpFirst Financial Common Stock to a former shareholder of F&MHastings Financial until
such former shareholder surrenders his or her certificate or certificates
representing shares of F&MHastings Financial or, in lieu thereof, an appropriate
affidavit of loss and an indemnity agreement or bond as may be required by Bancorp.First
Financial. Until so surrendered for exchange, each such stock certificate
formerly representing shares of F&MHastings Financial Common Stock will be deemed
for all corporate purposes (except for the payment of dividends, which will be
subject to the exchange of stock certificates as above provided) to evidence the
ownership of the number of shares of common stock of the surviving corporation
that the holder thereof would be entitled to receive upon its surrender to Bancorp.First
Financial.
Fractional Interests
- --------------------
No fractional shares of BancorpFirst Financial Common Stock will be issued as
a result of the Merger. In lieu thereof, F&MHastings Financial shareholders having
a fractional interest will be paid in cash by BancorpFirst Financial for the fractional
interest. Such payment shall be equal to the fractional interest timesmultiplied by
the Average Price.Exchange Ratio.
Effective Time Of The Merger
- ----------------------------
The Effective Time is expected to be as soon as practicable after the
approval of the Merger Agreement by F&MHastings Financial shareholders, the
satisfaction of all conditions set forth in the Merger Agreement and the receipt
of approvals from regulatory authorities, or at such later date as may be agreed
upon by F&MHastings Financial and Bancorp.First Financial. See "DESCRIPTION OF THE MERGER--RegulatoryMERGER--
Regulatory Considerations".
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32
No assurance can be provided that the necessary shareholder and
regulatory approvals will be obtained or that other conditions precedent to the
Merger will be satisfied. It is anticipated that the Merger will be consummated
in the first quarter of 1996.on January 1, 1997. In the event the Merger is not consummated byon or before
April 1, 1996,30, 1997, either party may terminate the Merger Agreement or the parties
may agree to extend the time for completion of the Merger.
Conditions To Consummation Of The Merger
- ----------------------------------------
Consummation of the Merger is subject to a number of conditions, each
of which may be waived by the party entitled thereto to the extent permissible
by applicable law, including the following:
(a) The receipt of all required regulatory approvals for the
completion of the Merger and the expiration of any applicable
waiting periods, with no such approval or authorization
containing any provision which would be materially adverse to
the merged businesses of F&MHastings Financial and Bancorp;First
Financial;
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31
(b) The validity or legality of the transactions contemplated by
the Merger Agreement shall not have been materially questioned
by any suit, action, investigation by any governmental body or
other legal or administrative proceedings;
(c) The receipt of all consents required for the consummation of
the Merger or for the prevention of any default under any
contract, agreement or permit of BancorpFirst Financial or F&MHastings
Financial which, if not obtained or made, is reasonably likely
to have, individually or in the aggregate, a material adverse
effect on the combined business affairs of BancorpFirst Financial and
F&M;Hastings Financial;
(d) Compliance by BancorpFirst Financial and F&MHastings Financial with
their respective covenants and the truth of all
representations and warranties as of the Effective Time;
(e) The absence of any material adverse change in the financial
condition, operations, corporate status or business of BancorpFirst
Financial or Hastings Financial since December 31, 1994 or F&M since April 30, 1995;
(f) The receipt of opinions from Bancorp'sFirst Financial's special counsel
and from F&M'sHastings Financial's special counsel with respect to
various corporate matters, due execution and delivery of the
Merger Agreement and various other Merger related matters;
(g) The receipt of an opinion of counsel, in form and substance
satisfactory to BancorpFirst Financial and F&M,Hastings Financial, to the
effect that, under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), no taxable gain or loss
will be recognized by F&M, BancorpHastings Financial, First Financial or
their respective shareholders as a result of the Merger,
(exceptexcept in respect of fractional share interests
sold);
25
33interests;
(h) The receipt of letters from Bancorp'sFirst Financial's independent
accountants stating that they are not aware of any reason that
BancorpFirst Financial is not in compliance with certain
pooling-of-interests criteria and that the Merger can be
accounted for as a pooling-of-interests from Bancorp'sFirst Financial's
perspective and the receipt of similar letters from F&M'sHastings
Financial's independent accountants;
(i) The receipt by BancorpFirst Financial of a satisfactory Phase I
Environmental Site Assessment of the real estate owned or
leased by F&MHastings Financial or, if such assessment is not
satisfactory to Bancorp, F&MFirst Financial, Hastings Financial and BancorpFirst
Financial shall have reached agreement as to the remedial
actions necessary to correct any unsatisfactory conditions;
and
(j) The approval of the Merger Agreement by F&MHastings Financial
shareholders at the Special Meeting by at least a 75% majority
vote of the outstanding F&M shares; and
(k) The receipt by F&M of an opinion from Professional Bank
Services, Inc. that the value and number of Deliverable Shares
to be received by the F&M shareholders pursuant to the Merger
Agreement is fair to the F&M shareholders from a financial
point of view.Hastings Financial shares.
24
32
No assurance can be given that all of the conditions to the Merger will
be satisfied or waived by any party permitted to do so.
Termination Of The Merger
- -------------------------
The Merger may be terminated at any time prior to the Effective Time
under any one or more of the following circumstances:
(a) By the mutual consent of the Boards of Directors of F&MHastings
Financial and Bancorp;First Financial;
(b) By BancorpFirst Financial if the holders of 10.0%2.00% or more of the
outstanding shares of F&MHastings Financial Common Stock
immediately prior to the Effective Time will be entitled to
receive cash in exchange for their F&MHastings Financial shares
pursuant to perfected dissenters' rights under the IndianaMichigan
Business Corporation Law;Act;
(c) By F&MHastings Financial or BancorpFirst Financial if, prior to the
Effective Time, the conditions to such party's obligation to
consummate the Merger are not met;
(d) By either F&MHastings Financial or BancorpFirst Financial if the
requisite approval of the shareholders of F&MHastings Financial
is not obtained or if the Merger is not consummated on or
before April 1, 1996; and30, 1997; or
(e) By BancorpFirst Financial if the Average Price is less than $28.48$27.625 or by
F&MHastings Financial if the Average Price is greater than $38.53,$37.375, (in
either case, as may be adjusted by the declaration of a stock
dividend, stock split or other such recapitalization).
26
34
Management Following The Merger
- -------------------------------
If the Merger is consummated, F&MHastings Financial and BancorpFirst Financial
will merge into a single corporation and BancorpFirst Financial will be the surviving
corporation. The directors of BancorpFirst Financial at the Effective Time of the
Merger will be the directors of the surviving corporation until their respective
successors are duly elected and qualified. Subject to the authority of the Board
of Directors as provided by law and the Regulations of the surviving
corporation, the officers of BancorpFirst Financial at the Effective Time will be the
officers of the Surviving Corporation.
If the Merger is consummated, Farmers & Merchants, F&M'sNational Bank of Hastings, Hastings
Financial's only subsidiary, will merge with and into Indiana Lawrence,become a wholly owned subsidiary of Bancorp, and Indiana Lawrence will be the surviving bank.First
Financial. The directors of Indiana LawrenceNational Bank of Hastings at the Effective Time of the Merger will
continue to be directors of the
surviving bank until their respective successors are duly elected and qualified.qualified
by First Financial as sole shareholder. Subject to the authority of the Board of
Directors of Indiana LawrenceNational Bank of Hastings as provided by its By-Laws and as
provided by law, and the By-Laws of the surviving bank, the officers of Indiana
LawrenceNational Bank of Hastings at the Effective Time
will continue to be the officers of National Bank of Hastings until their
successors are duly elected and qualified.
25
33
As part of the surviving bank.terms of the Merger Agreement, Larry J. Kornstadt has
agreed to remain in his current positions of President, CEO and Chairman of the
Board of National Bank of Hastings for a period of six months following the
Effective Time. Upon his retirement from the positions of President and CEO, Mr.
Kornstadt will remain as Chairman of the Board of National Bank of Hastings for
so long as mutually agreed to by Mr. Kornstadt and First Financial.
Interest Of Certain Persons In The Merger
- -----------------------------------------
The directors and officers of F&MHastings Financial and Farmers & MerchantsNational Bank of
Hastings have certain interests in the Merger in addition to their interests as
shareholders of F&MHastings Financial generally. The Board of Directors of F&MHastings
Financial was aware of these interests and considered them, among others, in
approving the Merger Agreement.
If the Merger is consummated, Bancorp shall itself employ or cause
Indiana Lawrence or another of its affiliates to employ, for at least a period
of two years after the Effective Time, those persons who are employees of
Farmers & Merchants immediately prior to the Effective Time, except for
voluntary or just-cause terminations. The compensation to be paid to former
Farmers & Merchants employees during such two year period shall be reviewed, but
not reduced, in accordance with the "Indiana Lawrence Bank Pay System
Documentation and Review Procedures" in effect as of September 11, 1995.
The Merger Agreement contains certain provisions regarding employee
benefits. IfAs soon as practicable after the Effective Date of the Merger, is consummated, Bancorp and Indiana LawrenceFirst
Financial will make available to theeligible employees and officers of Farmers & Merchants who continue
employment after the Merger and the Subsidiary MergerNational
Bank of Hastings the same nonqualified employee benefits
on the same terms and conditions that are offeredbenefit plans as then made
available to similarly situated employees of Indiana Lawrence.
27
35other First Financial subsidiaries.
Nonqualified employee benefit plans, fringe benefits and other employee
practices and policies in effect at National Bank of Hastings immediately prior
to the Effective Time will continue in effect until modified or terminated by
First Financial.
The First Financial Bancorp Thrift Plan (the "Thrift Plan"), which is a
401-K Plan, and the First Financial Bancorp Employees' Pension Plan (the "Pension"First
Financial Pension Plan") cover the majority of the employees of BancorpFirst Financial
and its subsidiaries. All employees who are 21 years of age and have completed
one year of service are covered. The Thrift Plan is voluntary and participants
may contribute up to 12.0% of base salary to the plan. Subject to the limitation
described below, BancorpFirst Financial subsidiaries contribute $0.50 for each $1.00 a
participant contributes. The matching contribution by BancorpFirst Financial
subsidiaries is limited to 3.00% of each participant's base salary and all
contributions become fully vested when made. Participants are 100% vested in the
Pension Plan after five years of credited service. For more information about
Bancorp'sFirst Financial's Thrift Plan and Pension Plan, see Bancorp'sFirst Financial's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,1995, previously
incorporated by reference.
Years of service of an employee of Farmers & Merchants prior to the
Effective TimeThe Pension Plan of the MergerNational Bank of Hastings (the "Hastings
Pension Plan") will be credited to such employee for purposes of
eligibility and vesting, but not for purposes of benefit accrual or
contributions, under the Thrift Plan and the Pension Plan. Farmers & Merchants
employees who satisfy the applicable eligibility requirements under the Pension
Plan will be eligible to participate immediately in themerged into First Financial's Pension Plan as of the
Effective Time. Farmers & Merchants employees who satisfyTime of the applicable
eligibility requirementsMerger. If a First Financial Pension Plan participant was
a Hastings Pension Plan participant immediately prior to the Effective Time,
such participant's accrued benefit under the ThriftFirst Financial Pension Plan will
be eligibleconsist of a past service benefit equal to participatethe accrued benefit under the
Hastings Pension Plan immediately prior to the Effective Time plus a future
service benefit based upon the participant's service after the Effective Time
with the companies participating in the ThriftFirst Financial Pension Plan. Service
with National Bank of Hastings prior the Effective Time will be counted for
eligibility and vesting purposes only under the First Financial Pension Plan.
26
34
The National Bank of Hastings 401(k) Employee Savings Plan on(the
"Hastings Savings Plan") will continue in effect until the first entry date, either January 1 or
July 1 coinciding with or next following the Effective Time.
The Farmers and Merchants Bank Retirement Plan and TrustTime (the "Retirement Plan""Initial Entry
Date") will be terminated as soon as practicable after the Effective
Time in a manner which will assure its tax-qualified status upon termination. In
the event the Effective Time occurs prior to the date. As of the required
contribution to the Retirement Plan, Bancorp or Indiana Lawrence will assume
responsibility for this contribution as well as for any pro-rata contribution
requirements for the period from December 31, 1995 to the Effective Time. Such
contributions, if required, shall be made before terminationInitial Entry Date, National Bank of the RetirementHastings employees and
officers may participate in First Financial's Thrift Plan. Upon terminationService with National
Bank of the Retirement Plan, provisions will be made for the
distribution of each participant's account in accordance with the terms of the
Retirement Plan, the Internal Revenue Code, and the Employee Retirement Income
Security Act of 1974 ("ERISA").
Years of service of an employee of Farmers & MerchantsHastings prior to the Effective Time will also be creditedcounted for eligibility
purposes under the Thrift Plan. After the Initial Entry Date, the Hastings
Savings Plan may be maintained as a frozen plan for an indefinite period or it
may be merged into the Thrift Plan. No contributions will be made to the
Hastings Savings Plan with respect to compensation paid after the Initial Entry
Date and the accounts of all participants in such plan will become fully vested
and nonforfeitable on the Initial Entry Date.
National Bank of Hastings has entered into a Deferred Compensation and
Non-Compete Agreement with Larry J. Kornstadt, Chairman of the Board, President
and CEO, and into Selective Retirement Plan agreements with six employees of the
bank. The Merger Agreement provides that First Financial will honor these
agreements.
National Bank of Hastings entered into the Deferred Compensation and
Non-Compete Agreement with Mr. Kornstadt on January 13, 1992. The Deferred
Compensation and Non-Compete Agreement provides that while he is employed by
National Bank of Hastings and for a period of five years after termination of
his employment, Mr. Kornstadt may not render the services or make the
investments listed below in a business entity engaged in a business determined
by National Bank of Hastings Board of Directors to be in competition with
National Bank of Hastings or any of its affiliates:
(a) become an owner, director, employee, agent or independent
contractor of such business;
(b) render advisory or other services for such business; or
(c) make a financial investment, except for purchases solely for
investment purposes of determining eligibilitynot more than 2.00% of stock or
securities outstanding, in such business.
The Deferred Compensation and Non-Compete Agreement also provides that,
upon the earlier of Mr. Kornstadt's retirement, 58th birthday, death or
disability or upon National Bank of Hastings' termination of his employment
without good cause, National Bank of Hastings will immediately pay Mr. Kornstadt
$24,000 and an additional $24,000 on the same day of each year thereafter for all other employee benefits offereda
period of four years. In the event of Mr. Kornstadt's death, the payments will
be made to Indiana Lawrence employees, including but
not limited to group health coverage, group term life and accidental death and
dismemberment coverage, and short-term and long-term disability coverage.
Farmers and Merchants employees who satisfy the applicable eligibility
requirements to participate in said other employee benefits shall be eligible to
participate immediately therein ashis spouse, if she survives him. National Bank of the Effective Time. If any employee of
Farmers & Merchants who continues employment with Indiana Lawrence is subject to
any pre-existing conditions exclusions or limitations under the group health
plan for employees of Indiana Lawrence, Bancorp or Indiana Lawrence will either
obtain other health insurance coverage or self-insure such employee so that the
employees' health coverageHastings is not
substantially more or less advantageous thanrequired to continue payments after the death of Mr. Kornstadt and the death of
his spouse. If Mr. Kornstadt fails to observe the terms of the group health plan.
28agreement, no
further payments will be due and National Bank of Hastings will have no further
liability under the terms of the agreement.
27
3635
The Selective Retirement Plans provide that, upon retirement at
specified ages, National Bank of Hastings will make supplementary monthly
payments for a period of not more than 120 months to the specified employee or
to the employee's surviving spouse if the employee should die before collecting
all the payments. If the employee should die before retirement, the employee's
spouse will begin receiving monthly payments immediately. The Selective
Retirement Plans also include a noncompete agreement ending ten years after the
employee's retirement date. If employment is terminated prior to retirement, the
benefits under the Selective Retirement Plan will be forfeited. Mr. Kornstadt is
one of the six employees covered by a Selective Retirement Plan. Four of the six
employees have retired and are currently receiving monthly payments.
The directors and executive officers of F&MHastings Financial have
indicated their intention to vote the shares of F&MHastings Financial Common Stock
held by them in favor of the Merger Agreement. On the Record Date, such
directors and executive officers as a group beneficially owned an aggregate of
3,02141,110 shares of F&MHastings Financial Common Stock, which represented 53.63%51.09% of
the shares issued and outstanding at that date.
Shareholders'Dissenters' Rights
Of Appraisal
Under Indiana Code Chapter 23-1-44, any- ------------------
Each holder of record of F&MHastings Financial Common Stock onhas the Record Date who does not vote in favor ofright to dissent
from the Merger may exercise
dissenting shareholder rights and receive the fair value of such holder's shares by complying withof Hastings Financial
Common Stock in cash if the requirements of Chapter 23-1-44.
Set forth below is a summaryshareholder follows the procedures required under
Sections 450.1761-450.1774 of the procedures relating toMichigan Business Corporation Act (the "MBCA")
set forth in Appendix C, the exercisematerial provisions of statutory dissenters' rights ("Dissenters' Rights"). THIS SUMMARY DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY EXPRESS REFERENCE TO
APPLICABLE INDIANA LAW, INCLUDING INDIANA CODE CHAPTER 23-1-44, A COPY OF WHICH
IS APPENDED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS. Any shareholderwhich are summarized below.
Under the MBCA, a holder of F&M contemplating exercising Dissenters' Rights with respect to F&MHastings Financial Common Stock is urgedmay dissent and
First Financial will pay to review carefully such provisions and to consult an attorney, because
Dissenters' Rights will be lostshareholder the fair value of such
shareholder's shares of Hastings Financial Common Stock if the procedural requirements under Chapter
23-1-44 are not fully and precisely satisfied. Each step must be taken in strict
compliancesuch shareholder (a)
files with the applicable provisions of Chapter 23-1- 44 in order for
holders to perfect Dissenters' Right.
Under Chapter 23-1-44, a shareholder of record on the record date for
the Special Meeting who desires to assert Dissenters' Rights must (1) deliver to
F&MHastings Financial, before the shareholder vote is taken, written notice of the shareholder's
intent to demand payment for his or her shares if the Merger is effectuated and (2)(b) does not vote the shareholder's shares in favor of
the Merger. A shareholder's
failure to vote against the Merger will not constitute a waiver of that
shareholder's Dissenters' Rights. BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A HOLDER OF
F&MHASTINGS FINANCIAL SHARES WHO VOTES BY PROXY AND WHO WISHES TO EXERCISE HIS/HIS OR
HER DISSENTERS' RIGHTS MUST (i)(I) VOTE AGAINST, OR (ii)(II) ABSTAIN FROM VOTING ON
SUCH APPROVAL AND ADOPTION. For purposes of Chapter 23-1-44,Sections 450.1762-450.1774, the fair
value of a dissenting shareholder's shares is the value of the shares
immediately before the effectuation of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger unless the exclusion would be
inequitable.
Within28
36
If the Merger is approved at the Hastings Financial Special Meeting of
Shareholders, First Financial will deliver written dissenters' notice to those
Hastings Financial shareholders who complied with the notice requirements. This
dissenters' notice will be sent no later than ten days after the approvalEffective Time
of the Merger by the shareholders,
F&M or Bancorp as the surviving corporation (hereinafter referred to for
purposes of this section as the "Corporation") must mail or deliver written
notice to each dissenting shareholder, whichMerger. The dissenters' notice must: (1)will (a) state where the payment demand must
be sent and where and when certificates for
certificated shares must be deposited; (2) inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; (3)deposited, (b) supply a form for demanding
payment that includes the date of the first announcement to the news media or to
shareholders of the terms of the proposed Merger and requires that the dissenting shareholder
certify whether or not he or she acquired beneficial ownership of the shares before
that date; (4)such date and (c) set a date 29
37
by which the Corporationpayment demand must receive the payment demand,be received, which
date may be not be
fewer than thirtyless that 30 nor more than sixty60 days after the date the
dissenters' notice is delivered; and (5) be accompanied by a copy of Indiana Code Chapter 23-1-44.was delivered to shareholders.
A shareholder who sent a dissenters' notice as described above, must demand payment,
certify whether the shareholderhe or she acquired beneficial ownership of the sharesHastings
Financial Common Stock before the date required to be set forth in the
dissenters' notice and deposit the
shareholder'shis or her certificates in accordance with the
terms of the notice. Hastings Financial shareholders who do not demand payment
or deposit certificates within the time set forth in the dissenters' notice. IF THE SHAREHOLDER FAILS TO TAKE THESE STEPS, HE OR SHE WILL NOT BE
ENTITLED TO PAYMENT FOR THE SHAREHOLDER'S SHARES AND WILL BE CONSIDERED TO HAVE
VOTED HIS OR HER SHARES IN FAVOR OF THE MERGER.
Following effectuationnotice lose
all rights to payment for their Hastings Financial Common Stock under the
provisions of Sections 450.1762-450.1774.
Except for "after-acquired" shares, which are discussed below, within
seven days after the Merger, the CorporationEffective Time or receipt of a payment demand, whichever is
later, First Financial will pay each shareholder who filed a payment demand with the Corporationdissenter the amount that the
CorporationFirst Financial
estimates to be the fair value of the dissenting shareholder's
shares.
Ifshares plus accrued interest. The payment
will be accompanied by (a) Hastings Financial's balance sheet as of the dissentingmost
recent fiscal year end, an income statement and a statement of changes in
shareholders' equity for that year plus the latest available interim financial
statements; (b) First Financial's estimate of the fair value of the Hastings
Financial Common Stock; (c) an explanation of how interest was calculated; and
(d) a statement of the dissenter's right to make a supplemental demand for
payment if the shareholder believes that the amount paid by the
Corporation is less than the fair
value forof his or her shares or ifthat the Corporation fails to make payment to the dissenting shareholder within sixty
daysinterest due is incorrectly calculated.
Hastings Financial Common Stock acquired after the date setof the first
announcement to the news media or Hastings Financial shareholders of the terms
of the Merger still qualify for demandingdissenters' rights, but the holder of these
shares may receive different and somewhat less favorable treatment than those
shares acquired before such announcements. First Financial, at its election, may
withhold payment from a dissenter who holds "after acquired" shares, at a time
when payment to other shareholders is required. Should First Financial elect to
withhold payment, First Financial, after the dissentingEffective Time, will estimate the
fair value of the dissenter's shares plus interest and offer to pay this amount
to each dissenter who agrees to accept it in full satisfaction. Along with its
offer, First Financial will send a statement of its estimate of the fair value
of the shares, an explanation of how interest was calculated and a statement of
the dissenter's right to make a supplemental demand for payment if the
shareholder maybelieves that the amount offered is less than the fair value of his
or her shares or that the interest due is incorrectly calculated.
29
37
In the event a shareholder believes the payment received, or the amount
offered in the case of after-acquired shares, is less than the fair value of his
or her shares or that the interest due is incorrectly calculated, he or she must
notify the CorporationFirst Financial in writing of his or her own estimate of the fair value
of the shares and interest due and make a supplemental demand for payment of the
amount he or she believes to be owing. This right is waived unless the dissenter
makes his or her shares and demand within 30 days after First Financial made or offered
payment offor his or her estimate. Such a demand
for payment must be made in writing within thirty days after the Corporation has
made payment for the dissenting shareholder's shares. A dissenter who fails to
make the demand waives his or her right to demand payment.
If a supplemental demand for payment remains unsettled, the Corporation mustFirst Financial shall
commence a proceeding in the circuit or superior court of Fulton County within sixty60 days after receiving the payment demand and petition the
circuit court of Barry County to determine the fair value of the shares. If the Corporation failsand accrued interest.
Should First Financial fail to commence the
proceeding within the sixty day period,do so, it must pay each dissenter whose demand
remains unsettled the amount demanded. The Corporation must make all dissenters
whose demands remain unsettled parties to the proceeding and all parties must be
served a copy of the petition. The court may appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question of fair
value. Each dissenting shareholderdissenter made a party to the
proceeding is entitled to judgment for the amount if any, by which the court finds thedetermined
fair value of the
dissenters' shares plus interest exceeds the amount paid by First
Financial or, in the Corporation.
The court in an appraisal proceeding shall determine all costscase of after-acquired shares for which payment was not
made, the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court, and shall assess these costs and the fees and expenses
of counsel and experts for the respective parties against the parties in amounts
the court finds equitable.
Every shareholder who does not deliver a notice of intent to demand
payment for his or her shares as aforesaid, or who votes in favor of the Merger,
is bound by the vote of the assenting shareholders and will have no right to the
paymenttotal amount of the fair value of his or her shares as a result of the Merger. Voting
against the Merger does not in itself constitute the notice of intent to demand
payment required by Indiana Code Chapter 23-1-44.
30
38plus interest.
A PROXY OR VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS
A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
THE ABOVE SUMMARY OF THE PROVISIONS REGARDING DISSENTERS' RIGHTS UNDER
THE MBCA IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF SECTIONS 450.1761-450.1774
OF THE MBCA. THE TEST OF SECTIONS 450.1761-450.1774 IS ATTACHED HERETO AS
APPENDIX C.
SHAREHOLDERS OF HASTINGS FINANCIAL INTENDING TO EXERCISE DISSENTERS'
RIGHTS ARE URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO COMPLY WITH ALL
REQUIREMENTS OF SECTIONS 450.1761-450.1774 OF THE MBCA WILL RESULT IN THE LOSS
OF DISSENTERS' RIGHTS.
The Merger Agreement includes a provision that BancorpFirst Financial may
terminate the Merger Agreement before the Merger becomes effective if the number
of shares of F&MHastings Financial Common Stock for which Dissenters' Rights are
perfected is 10%2.00% or more of the outstanding shares of F&MHastings Financial
Common Stock.
The Board of Directors of F&MHastings Financial has determined that the
Merger is fair to and in the best interest of F&M'sHastings Financial's shareholders
and has recommended that the F&MHastings Financial shareholders vote in favor of
the Merger.
30
38
Federal Income Tax Consequences Of The Merger
- ---------------------------------------------
Assuming that (i) the Merger constitutes a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code; (ii) after the
transaction, Bancorp,First Financial, as successor of F&M,Hastings Financial, will hold
substantially all of F&M'sHastings Financial's assets; and (iii) in the transaction,
the F&MHastings Financial shareholders will exchange an amount of stock
constituting control of F&MHastings Financial solely for BancorpFirst Financial Common
Stock; the following is a summary of the tax consequences which will result:
(1) No gain or loss will be recognized by F&MHastings Financial
shareholders who exchange all of their F&MHastings Financial
Common Stock for BancorpFirst Financial Common Stock pursuant to the
Merger, except to the extent of any cash received in lieu of
receipt of a fractional share of BancorpFirst Financial Common Stock.
(2) The basis of the BancorpFirst Financial Common Stock (including
fractional share interests) received by F&MHastings Financial
shareholders who exchange all of their F&MHastings Financial
Common Stock for BancorpFirst Financial Common Stock will be the same
as the basis of the F&MHastings Financial Common Stock
surrendered in exchange therefor.
(3) The holding period of the BancorpFirst Financial Common Stock
(including fractional share interests) received by F&MHastings
Financial shareholders who exchange all of their F&MHastings
Financial Common Stock for BancorpFirst Financial Common Stock will
include the period during which the F&MHastings Financial Common
Stock was held, provided the F&MHastings Financial Common Stock
was held as a capital asset on the date of the exchange.
(4) Where a cash payment is received by a F&MHastings Financial
shareholder in lieu of fractional shares of BancorpFirst Financial
Common Stock, the cash payment will be treated as a
distribution in redemption of the fractional share interest by
Bancorp,First Financial, subject to the provisions and limitations of
Section 302 of the Internal Revenue Code. Where such exchange
qualifies under Section 302(a) of the Internal Revenue Code,
such shareholder will recognize a capital gain or loss
provided that the F&MHastings Financial Common Stock was held as
a capital asset on the date of the Merger.
31
39
(5) Any F&MHastings Financial shareholder who perfects dissenters'
rights and receives solely cash in exchange for such
shareholder's F&MHastings Financial Common Stock shall be treated
as having received such cash as a distribution in redemption
of the F&MHastings Financial Common Stock subject to the
provisions and limitations of Section 302 of the Internal
Revenue Code. Where, as a result of such distribution, such
F&MHastings Financial shareholder owns no BancorpFirst Financial Common
Stock, either directly or through the application of the
constructive ownership rules of Section 318(a) of the Internal
Revenue Code, the redemption will be a complete termination of
interest within the meaning of Section 302(b)(3) of the
Internal Revenue Code and the cash will be treated as a
distribution in full
31
39
payment and exchange for F&MHastings Financial Common Stock as
provided in Section 302(a) of the Internal Revenue Code. Gain
or loss will be realized and recognized to such F&MHastings
Financial shareholder in an amount equal to the difference
between the redemption price and the adjusted basis of the
F&MHastings Financial Common Stock surrendered in exchange
therefor.
(6) No gain or loss will be recognized by F&MHastings Financial or
BancorpFirst Financial in connection with the transaction.
Receipt of an opinion of tax counsel (the "Tax Opinion") with respect
to the above is a condition precedent to consummation of the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON THE
CODE, TREASURY REGULATIONS, CASE LAW AND INTERNAL REVENUE SERVICE RULINGS AS IN
EFFECT ON THE DATE HEREOF WITHOUT CONSIDERATION OF THE FACTS AND CIRCUMSTANCES
OF ANY PARTICULAR SITUATION OF ANY F&MHASTINGS FINANCIAL SHAREHOLDER. THIS
DISCUSSION ASSUMES THAT F&MHASTINGS FINANCIAL SHAREHOLDERS HOLD THEIR F&MHASTINGS
FINANCIAL COMMON STOCK AS CAPITAL ASSETS WITHIN THE MEANING OF SECTION 1221 OF
THE CODE. SPECIAL TAX CONSIDERATIONS NOT DISCUSSED HEREIN MAY BE APPLICABLE TO
PARTICULAR CLASSES OF TAXPAYERS, SUCH AS BROKER-DEALERS, OR TO ANY SHAREHOLDER
WHO ACQUIRED F&MHASTINGS FINANCIAL COMMON STOCK THROUGH THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. EACH SHAREHOLDER SHOULD CONSULT WITH
HIS OR HER OWN TAX ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF EXISTING AND
PROPOSED FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Accounting Treatment
- --------------------
It is anticipated that the Merger will be accounted for as a
pooling-of-interests. The receipt by BancorpFirst Financial of letters from its
independent accountants stating that they are not aware of any reason that BancorpFirst
Financial is not in compliance with the pooling-of-interests criteria and that
the Merger can be accounted for as a pooling-of-interests from Bancorp'sFirst Financial's
perspective and the receipt of similar letters from F&M'sHastings Financial's
independent accountants is a condition precedent to the respective party's
obligation to consummate the Merger.
32
40
Regulatory Considerations
- -------------------------
The proposed transaction requires the approval of the Federal Reserve
Board under section 3(a)(5) of the Bank Holding Company Act of 1956, as amended,
and also requires the approval of the FDIC under Section 18(c) of the Federal
Deposit Insurance Act.amended.
The Bank Holding Company Act provides that the Federal Reserve Board may not
approve any transaction which would result in a monopoly or which would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States, or any
transaction the effect of which in any section of the United States may be
substantially to lessen competition or to tend to create a monopoly or which in
any other manner might restrain trade, unless the Federal Reserve Board
determines that the anti-competitive effects of the proposed merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the community to be served.
The same anticompetitive considerations regarding monopoly or lessening
of competition are also provided for in the Federal Deposit Insurance Act.
The Merger may generally not be consummated for fifteen days after the
receipt of Federal Reserve Board approval and FDIC approval. Such fifteen day period will become
thirty days, however, if the United States Department of Justice issues an
adverse comment relating to competitive factors. During such fifteen or thirty
day period, the United States Department of Justice may commence legal action
challenging the Merger under the Federal Anti-trust Laws. If the Justice
Department does not commence a legal action during such period, the Merger may
be consummated and the Justice Department may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Anti-TrustAntiTrust Act.
The Merger is also subject to approval by the Indiana Department of
Financial Institutions under Chapter 28-2-16 of the Indiana Code, which provides
for foreign bank holding company acquisitions, and under Chapter 28-1-7 of the
Indiana Code, which provides for mergers of Indiana state banks.
ApplicationsAn application requesting approval werewas submitted to the Federal Reserve
Board on __________ __, 1995, to the FDIC on ___________ __, 1995____________ ___, 1996. First Financial and to the
Indiana Department ofHastings Financial Institutions on _______ __, 1995. Bancorp and
F&M
anticipate that the Merger will be approved by the Federal Reserve Board
the FDIC and the Indiana Department of Financial Institutions and
will not be challenged by the Justice Department under the anti-trust laws.
However, there can be no assurance that the Federal Reserve Board the FDIC, the Indiana
Department of Financial Institutions and the
Justice Department will concur in this assessment.
33
41
Pro Forma Unaudited Financial Information
- -----------------------------------------
The following pro forma unaudited consolidated balance sheet as of SeptemberJune
30, 19951996 and the pro forma unaudited consolidated statements of earnings for the
ninesix months ended SeptemberJune 30, 19951996 and 19941995 and the years ended December 31, 1995,
1994 1993 and 19921993 indicate the pro forma effects of the merger of F&MHastings Financial
into BancorpFirst Financial and the issuance of shares of BancorpFirst Financial Common Stock
in exchange for all of the outstanding F&MHastings Financial Common Stock using the
pooling-of-interests method of accounting. Each share of F&MHastings Financial
Common Stock will be canceled and extinguished in consideration and exchange for
a number of shares of BancorpFirst Financial Common Stock equal to the Exchange Ratio.
The pro forma information has been calculated assuming the issuance of 369,140301,887
shares of BancorpFirst Financial Common Stock, which is the Deliverable Sharesnumber of shares which
would have been issued if the Merger was effective on October 31, 1995.
Bancorp has a December 31 fiscal year end while F&M has a fiscal year
ending April 30. For purposes of the pro forma unaudited consolidated financial
statements, F&M's statements of earnings have been adjusted to reflect the nine
months ended September 30 and the years ended December 31. Even though F&M uses
an April 30 fiscal year end for reporting purposes, its internal books and
records are maintained on a calendar year basis. F&M's internal financial
statements were therefore used for the pro forma financial information on the
following pages.
On July 15, 1995 Peoples Bank & Trust Co. ("Peoples") merged with and
into a wholly owned interim subsidiary of Bancorp and on October 1, 1995 Bright
Financial Services, Inc. ("Bright") merged with and into Bancorp. Both mergers
used the pooling-of-interest method of accounting. At December 31, 1994, its
most recent fiscal year end, Peoples had total assets of approximately $53.0
million and net earnings of $703,000 for the year then ended. Bright had total
assets of approximately $114.3 million at December 31, 1994 and net earnings of
$920,000 for the year then ended. The following pro forma financial information
has not been restated to include Peoples and Bright because these mergers did
not result in the acquisition by Bancorp of significant subsidiaries, either
individually or in the aggregate, under applicable regulations of the Exchange
Act and are not expected to have a material effect on the financial condition
and results of operations of Bancorp.3, 1996.
33
41
The pro forma information is based on the historical financial
statements of the organizations presented giving effect to the accounting method
proposed and the assumptions and adjustments in the accompanying notes to the
pro forma financial statements. These pro forma unaudited statements are
presented for illustrative purposes only and may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
unaudited financial statements should be read in conjunction with the audited
and unaudited financial statements and related notes set forth or incorporated
by reference in this Proxy Statement-Prospectus.
34
42
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AT SEPTEMBERJUNE 30, 19951996
First Hastings Consolidated
Bancorp F&MFinancial Financial Pro Forma
---------- ---------- --------------------- --------- ---------
(Dollars in thousands)
ASSETS
ASSETS
Cash and due from banks $ 93,539100,805 $ 2,7543,249 $ 96,293104,054
Interest-bearing deposits with other banks 5,5126,385 0 5,5126,385
Federal funds sold and securities purchased
under agreements to resell 8,006 0 8,0064,451 2,800 7,251
Investment securities held to maturity 105,849 20,494 126,343
Investment securities available for sale,
at fair value 248,540 2,848 251,388
Loans:
Commercial 321,846 7,032 328,878
Real estate-construction 36,730 77 36,807
Real estate-mortgage 753,777 19,009 772,786
Installment 315,097 6,420 321,517
Credit card 14,086 0 14,086
Lease financing 14,968 0 14,968
---------- ---------- ----------
Total loans 1,456,504 32,538 1,489,042
Less:
Unearned385,738 12,060 397,798
Loans, net of unearned income 612 2 614
Allowanceand
allowance for loan losses 19,364 652 20,016
---------- ---------- ----------
Net loans 1,436,528 31,884 1,468,4121,591,624 26,826 1,618,450
Premises and equipment 37,710 851 38,561
Deferred income taxes 3,964 176 4,14041,498 1,017 42,515
Accrued interest and other assets 29,741 959 30,700
---------- ---------- ----------44,880 895 45,775
----------- -------- -----------
TOTAL ASSETS $1,969,389 $ 59,966 $2,029,355
========== ========== ==========2,175,381 $ 46,847 $ 2,222,228
=========== ======== ===========
LIABILITIES
Deposits:
Noninterest-bearingDeposits $ 192,0991,811,404 $ 6,76640,736 $ 198,865
Interest-bearing 1,448,951 44,074 1,493,025
---------- ---------- ----------
Total deposits 1,641,050 50,840 1,691,8901,852,140
Short term borrowings Federal funds purchased and securities
sold under agreements to repurchase 64,332 800 65,132
Other 21,64587,151 0 21,645
---------- ---------- ----------
Total short-term87,151
Long term borrowings 85,977 800 86,7774,541 0 4,541
Accrued interest and other liabilities 21,801 527 22,328
---------- ---------- ----------23,446 831 24,277
----------- -------- -----------
TOTAL LIABILITIES 1,748,828 52,167 1,800,9951,926,542 41,567 1,968,109
SHAREHOLDERS' EQUITY
Common stock 100,549 600107,111 79 (A) 103,502109,526
Surplus 14,241 1,20012,611 731 (A) 12,95711,006
Retained earnings 104,957 6,212 111,169130,074 4,489 134,563
Treasury stock, at cost (464) 0 (131)(A) 0(464)
Unrealized net gain (losses) on securities
available-for-sale, net of deferred income taxes 865 (82) 783(244) (19) (263)
Restricted stock awards (51)(249) 0 (51)
---------- ---------- ----------(249)
----------- -------- -----------
TOTAL SHAREHOLDERS' EQUITY 220,561 7,799 228,360
---------- ---------- ----------248,839 5,280 254,119
----------- -------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,969,389 $ 59,966 $2,029,355
========== ========== ==========
- -------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.
35
43
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Consolidated
Bancorp F&M Pro Forma
---------- ---------- ------------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees2,175,381 $ 94,30546,847 $ 2,313 $ 96,618
Investment securities:
Taxable 11,751 741 12,492
Tax-exempt 5,758 276 6,034
----------- ---------- -----------
Total investment securities 17,509 1,017 18,526
Interest-bearing deposits with other banks 224 0 224
Federal funds sold and securities
purchased under agreements to resell 128 32 160
----------- ---------- -----------
Total interest income 112,166 3,362 115,528
INTEREST EXPENSE:
Deposits 42,747 1,366 44,113
Short-term borrowings 3,376 3 3,379
----------- ---------- -----------
Total interest expense 46,123 1,369 47,492
----------- ---------- -----------
Net interest income 66,043 1,993 68,036
Provision for loan losses 1,151 135 1,286
----------- ---------- -----------
Net interest income after
provision for loan losses 64,892 1,858 66,750
NONINTEREST INCOME:
Service charges on deposit accounts 6,314 145 6,459
Trust income 5,706 7 5,713
Gains on investment securities 300 0 300
Other 2,908 78 2,986
----------- ---------- -----------
Total noninterest income 15,228 230 15,458
NONINTEREST EXPENSES:
Salaries and employee benefits 24,321 827 25,148
Net occupancy 3,260 102 3,362
Furniture and equipment 2,415 85 2,500
Data processing 3,977 24 4,001
Deposit insurance 1,860 42 1,902
State taxes 1,224 0 1,224
Other 9,738 359 10,097
----------- ---------- -----------
Total noninterest expenses 46,795 1,439 48,234
----------- ---------- -----------
INCOME BEFORE INCOME TAXES 33,325 649 33,974
Income tax expense 9,850 178 10,028
----------- ---------- -----------
NET EARNINGS $ 23,475 $ 471 $ 23,9462,222,228
=========== ========== ===========
NET EARNINGS PER SHARE $ 1.91 $ 83.51 $ 1.89
=========== ========== ===========
AVERAGE SHARES OUTSTANDING 12,311,609 5,633 12,680,749 (B)
=========== ================== ===========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.
3639.
35
4443
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 19941996
First Hastings Consolidated
Bancorp F&MFinancial Financial Pro Forma
------------ ------ --------------------- --------- ---------
(Dollars in thousands, except per share data)
INTEREST INCOME:
INTEREST INCOME:
Loans, including fees $ 76,459 $2,19070,112 $ 78,6491,260 $71,372
Investment securities:
Taxable 13,800 789 14,589
Tax-exempt 7,349 269 7,618
------------ ------ ------------
Total investment securities 21,149 1,058 22,207
Interest-bearing deposits with other banks 298 0 298
Federal funds sold and securities
purchased under agreements to resell 281 63 344
------------ ------ ------------12,516 320 12,836
Other 568 52 620
----------- ------- ----------
Total interest income 98,187 3,311 101,49883,196 1,632 84,828
INTEREST EXPENSE:
Deposits 34,634 1,357 35,99132,646 560 33,206
Short-term borrowings 1,342 3 1,3451,095 0 1,095
Long-term borrowings 124115 0 124
------------ ------ ------------115
----------- ------- ----------
Total interest expense 36,100 1,360 37,460
------------ ------ ------------33,856 560 34,416
----------- ------- ----------
Net interest income 62,087 1,951 64,03849,340 1,072 50,412
Provision for loan losses 657 76 733
------------ ------ ------------1,370 9 1,379
----------- ------- ----------
Net interest income after
provision for loan losses 61,430 1,875 63,30547,970 1,063 49,033
NONINTEREST INCOME:
Service charges on deposit accounts 6,154 145 6,299
Trust income 5,308 2 5,310
Losses on investment securities (618) 0 (618)
Other 3,179 83 3,262
------------ ------ ------------
Total noninterest income 14,023 230 14,253INCOME 10,662 194 10,856
NONINTEREST EXPENSES:
Salaries and employee benefits 23,446 807 24,253
Net occupancy 3,165 90 3,255
Furniture and equipment 2,217 73 2,290
Data processing 3,863 21 3,884
Deposit insurance 2,652 107 2,759
State taxes 1,318 0 1,318
Other 9,583 289 9,872
------------ ------ ------------
Total noninterest expenses 46,244 1,387 47,631
------------ ------ ------------EXPENSES 33,917 775 34,692
----------- ------- ----------
INCOME BEFORE INCOME TAXES 29,209 718 29,92724,715 482 25,197
Income tax expense 7,552 173 7,725
------------ ------ ------------7,844 146 7,990
----------- ------- ----------
NET EARNINGS $ 21,65716,871 $ 545 $ 22,202
============ ====== ============336 $17,207
=========== ======= ==========
NET EARNINGS PER SHARE $ 1.77 $96.801.28 $ 1.76
============ ====== ============4.41 $ 1.27
=========== ======= ==========
AVERAGE SHARES OUTSTANDING 12,213,201 5,633 12,582,341(B)
============ ====== ============13,203,147 76,130 13,505,034 (B)
=========== ======= ==========
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
First Hastings Consolidated
Financial Financial Pro Forma
--------- --------- ---------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees $ 61,385 $ 1,056 $ 62,441
Investment securities 11,752 421 12,173
Other 169 16 185
----------- ------- ----------
Total interest income 73,306 1,493 74,799
INTEREST EXPENSE:
Deposits 27,503 523 28,026
Short-term borrowings 2,468 0 2,468
Long-term borrowings 0 0 0
----------- ------- ----------
Total interest expense 29,971 523 30,494
----------- ------- ----------
Net interest income 43,335 970 44,305
Provision for loan losses 619 3 622
----------- ------- ----------
Net interest income after
provision for loan losses 42,716 967 43,683
NONINTEREST INCOME 10,137 255 10,392
NONINTEREST EXPENSES 31,236 794 32,030
----------- ------- ----------
INCOME BEFORE INCOME TAXES 21,617 428 22,045
Income tax expense 6,259 100 6,359
----------- ------- ----------
NET EARNINGS $ 15,358 $ 328 $ 15,686
=========== ======= ==========
NET EARNINGS PER SHARE $ 1.26 $ 4.26 $ 1.25
=========== ======= ==========
AVERAGE SHARES OUTSTANDING 12,208,840 76,915 12,510,727 (B)
=========== ======= ==========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.39.
36
44
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
First Hastings Consolidated
Financial Financial Pro Forma
--------- --------- ---------
Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees $ 129,058 $ 2,137 $ 131,195
Investment securities 24,024 771 24,795
Other 769 97 866
----------- ------- -----------
Total interest income 153,851 3,005 156,856
INTEREST EXPENSE:
Deposits 59,413 1,074 60,487
Short-term borrowings 4,051 1 4,052
Long-term borrowings 52 0 52
----------- ------- -----------
Total interest expense 63,516 1,075 64,591
----------- ------- -----------
Net interest income 90,335 1,930 92,265
Provision for loan losses 2,108 34 2,142
----------- ------- -----------
Net interest income after
provision for loan losses 88,227 1,896 90,123
NONINTEREST INCOME 20,558 469 21,027
NONINTEREST EXPENSES 63,345 1,561 64,906
----------- ------- -----------
INCOME BEFORE INCOME TAXES 45,440 804 46,244
Income tax expense 13,651 188 13,839
----------- ------- -----------
NET EARNINGS $ 31,789 $ 616 $ 32,405
=========== ======= ===========
NET EARNINGS PER SHARE $ 2.55 $ 8.10 $ 2.53
=========== ======= ===========
AVERAGE SHARES OUTSTANDING 12,488,168 76,036 12,790,055 (B)
=========== ======= ===========
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
First Hastings Consolidated
Financial Financial Pro Forma
--------- --------- ---------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees $ 104,936 $ 1,833 $ 106,769
Investment securities 27,905 1,003 28,908
Other 663 70 733
----------- ------- -----------
Total interest income 133,504 2,906 136,410
INTEREST EXPENSE:
Deposits 47,042 1,009 48,051
Short-term borrowings 2,421 0 2,421
Long-term borrowings 124 0 124
----------- ------- -----------
Total interest expense 49,587 1,009 50,596
----------- ------- -----------
Net interest income 83,917 1,897 85,814
Provision for loan losses 1,268 3 1,271
----------- ------- -----------
Net interest income after
provision for loan losses 82,649 1,894 84,543
NONINTEREST INCOME 17,462 317 17,779
NONINTEREST EXPENSES 62,139 1,670 63,809
----------- ------- -----------
INCOME BEFORE INCOME TAXES 37,972 541 38,513
Income tax expense 9,799 138 9,937
----------- ------- -----------
NET EARNINGS $ 28,173 $ 403 $ 28,576
=========== ======= ===========
NET EARNINGS PER SHARE $ 2.31 $ 5.08 $ 2.28
=========== ======= ===========
AVERAGE SHARES OUTSTANDING 12,210,753 79,249 12,512,640 (B)
=========== ======= ===========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
39.
37
45
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 19941993
First Hastings Consolidated
Bancorp F&MFinancial Financial Pro Forma
------------ ------ --------------------- --------- ---------
(Dollars in thousands, except per share data)
INTEREST INCOME:
INTEREST INCOME:
Loans, including fees $ 104,936 $2,906 $ 107,842
Investment securities:
Taxable 18,229 1,050 19,279
Tax-exempt 9,676 365 10,041
------------ ------ ------------
Total investment securities 27,905 1,415 29,320
Interest-bearing deposits with other banks 388 0 388
Federal funds sold and securities
purchased under agreements to resell 275 76 351
------------ ------ ------------
Total interest income 133,504 4,397 137,901
INTEREST EXPENSE:
Deposits 47,042 1,783 48,825
Short-term borrowings 2,421 4 2,425
Long-term borrowings 124 0 124
------------ ------ ------------
Total interest expense 49,587 1,787 51,374
------------ ------ ------------
Net interest income 83,917 2,610 86,527
Provision for loan losses 1,268 157 1,425
------------ ------ ------------
Net interest income after
provision for loan losses 82,649 2,453 85,102
NONINTEREST INCOME:
Service charges on deposit accounts 8,222 192 8,414
Trust income 7,017 2 7,019
Losses on investment securities (1,754) 0 (1,754)
Other 3,977 106 4,083
------------ ------ ------------
Total noninterest income 17,462 300 17,762
NONINTEREST EXPENSES:
Salaries and employee benefits 31,296 1,033 32,329
Net occupancy 4,211 125 4,336
Furniture and equipment 3,006 98 3,104
Data processing 5,205 26 5,231
Deposit insurance 3,537 142 3,679
State taxes 1,726 0 1,726
Other 13,158 409 13,567
------------ ------ ------------
Total noninterest expenses 62,139 1,833 63,972
------------ ------ ------------
INCOME BEFORE INCOME TAXES 37,972 920 38,892
Income tax expense 9,799 220 10,019
------------ ------ ------------
NET EARNINGS $ 28,173 $ 700 $ 28,873
============ ====== ============
NET EARNINGS PER SHARE $ 2.31 $124.25 $ 2.30
============ ====== ============
AVERAGE SHARES OUTSTANDING 12,210,753 5,633 12,579,893(B)
============ ====== ============
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.
38
46
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1993
Consolidated
Bancorp F&M Pro Forma
------------ ------ ------------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees $ 99,333 $3,219 $ 102,5521,798 $ 101,131
Investment securities:
Taxable 19,363 1,197 20,560
Tax-exempt 10,659 291 10,950
------------ ------ ------------
Total investment securities 30,022 1,488 31,510
Interest-bearing deposits with other banks 578 0 578
Federal funds sold and securities
purchased under agreements to resell 806 141 947
------------ ------ ------------1,043 31,065
Other 1,384 76 1,460
----------- ------- -----------
Total interest income 130,739 4,848 135,5872,917 133,656
INTEREST EXPENSE:
Deposits 50,862 2,108 52,9701,056 51,918
Short-term borrowings 790 0 790
Long-term borrowings 228 0 228
------------ ------ ----------------------- ------- -----------
Total interest expense 51,880 2,108 53,988
------------ ------ ------------1,056 52,936
----------- ------- -----------
Net interest income 78,859 2,740 81,5991,861 80,720
Provision for loan losses 3,747 395 4,142
------------ ------ ------------0 3,747
----------- ------- -----------
Net interest income after
provision for loan losses 75,112 2,345 77,4571,861 76,973
NONINTEREST INCOME:
Service charges on deposit accounts 8,513 195 8,708
Trust income 6,425 10 6,435
Losses on investment securities (71) 0 (71)
Other 4,722 103 4,825
------------ ------ ------------
Total noninterest incomeINCOME 19,589 308 19,897280 19,869
NONINTEREST EXPENSES:
Salaries and employee benefits 29,633 1,116 30,749
Net occupancy 4,219 113 4,332
Furniture and equipment 3,147 87 3,234
Data processing 4,741 56 4,797
Deposit insurance 3,468 142 3,610
State taxes 1,704 0 1,704
Other 15,126 383 15,509
------------ ------ ------------
Total noninterest expensesEXPENSES 62,038 1,897 63,935
------------ ------ ------------1,510 63,548
----------- ------- -----------
INCOME BEFORE INCOME TAXES 32,663 756 33,419631 33,294
Income tax expense 7,469 193 7,662
------------ ------ ------------219 7,688
----------- ------- -----------
NET EARNINGS $ 25,194 $ 563412 $ 25,757
============ ====== ============25,606
=========== ======= ===========
NET EARNINGS PER SHARE $ 2.06 $99.96$ 5.23 $ 2.05
============ ====== ======================= ======= ===========
AVERAGE SHARES OUTSTANDING 12,211,405 5,633 12,580,545(B)
============ ====== ============
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.
39
47
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1992
Consolidated
Bancorp F&M Pro Forma
----------- ------ -----------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees $ 109,072 $3,502 $ 112,574
Investment securities:
Taxable 20,778 1,256 22,034
Tax-exempt 10,918 253 11,171
----------- ------ -----------
Total investment securities 31,696 1,509 33,205
Interest-bearing deposits with other banks 883 0 883
Federal funds sold and securities
purchased under agreements to resell 1,788 94 1,882
----------- ------ -----------
Total interest income 143,439 5,105 148,544
INTEREST EXPENSE:
Deposits 65,743 2,511 68,254
Short-term borrowings 878 0 878
Long-term borrowings 337 0 337
----------- ------ -----------
Total interest expense 66,958 2,511 69,469
----------- ------ -----------
Net interest income 76,481 2,594 79,075
Provision for loan losses 6,543 320 6,863
----------- ------ -----------
Net interest income after
provision for loan losses 69,938 2,274 72,212
NONINTEREST INCOME:
Service charges on deposit accounts 7,810 176 7,986
Trust income 5,912 0 5,912
Gains on investment securities 1,811 3 1,814
Other 4,281 131 4,412
----------- ------ -----------
Total noninterest income 19,814 310 20,124
----------- ------ -----------
NONINTEREST EXPENSES:
Salaries and employee benefits 28,260 1,011 29,271
Net occupancy 3,858 107 3,965
Furniture and equipment 3,228 136 3,364
Data processing 4,725 22 4,747
Deposit insurance 3,553 118 3,671
State taxes 1,638 0 1,638
Other 15,377 412 15,789
----------- ------ -----------
Total noninterest expenses 60,639 1,806 62,445
----------- ------ -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 29,113 778 29,891
Income tax expense 7,343 180 7,523
----------- ------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 21,770 $ 598 $ 22,36878,883 12,513,292 (B)
=========== ====== ===========
EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 1.77 $106.16 $ 1.76
=========== ====== ===========
AVERAGE SHARES OUTSTANDING 12,318,805 5,633 12,687,945(B)
=========== ============= ===========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page
41.
4039.
38
4846
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------
General
- -------
Reclassification of information has been made at times to provide
consistency in the presentation of financial information for the corporations
involved. These reclassifications are not material in nature and had no effect
on net earnings.
Listed below are certain costs that are directly attributable to the
Merger and some of these can reasonably be expected to be included in the
expenses of BancorpFirst Financial during the next 12 months. At SeptemberJune 30, 1995,1996,
approximately $80,000$16,000 of the costs listed below have already been paid and
expensed or accrued and expensed by F&M.Hastings Financial. Those costs not
previously paid or accrued were not considered in the preparation of the Pro
Forma Unaudited Consolidated Financial Statements.
Classification Amount
-------------- --------------
(Dollars in thousands)
Legal $125,000$ 40
Accounting 95,00075
Financial advisor 15,000120
Regulatory filing fees 13,00010
Other 13,000
--------10
-------
Total $261,000$ 255
=======
(A) BancorpFirst Financial is offering to exchange shares of BancorpFirst Financial
Common Stock for outstanding shares of F&MHastings Financial Common Stock.
The exact number of BancorpFirst Financial shares to be issued (Deliverable Shares)for each share
of Hastings Financial Common Stock is not yet known. It will be
calculated by dividing $12,500,000the Merger Price by the Average, Price. Inwhich quotient
will be further divided by the aggregate number of shares of Hastings
Financial Common Stock issued and outstanding immediately prior to the
Effective Time. The Exchange Ratio will be appropriately adjusted in
the event of the subdivision or split of the outstanding Bancorp shares, the
payment of a dividend in Bancorp shares orFirst
Financial Common Stock, a capital reorganization, or a reclassification
or recapitalization affecting the closing price for Bancorp shares during some but not all
of said trading days, the number of Deliverable Shares will be adjusted
proportionately so that the holders of outstanding F&M shares shall
receive the number of Bancorp shares that represents the same
percentage of the value of outstanding Bancorp shares at the Effective
Time as would have been represented by the number of shares such
shareholders would have received if the event had not occurred. Each
holder of F&M shares shall be entitled to a portion of the Deliverable
Shares that is equal to the number of Deliverable Shares multiplied by
a fraction, the numerator of which is the number of F&M shares held by
that shareholder immediately prior to the Effective Time and the
denominator of which is the number of F&M shares outstanding
immediately prior to the Effective Time.
Total Deliverable Shares would equal 369,140 shares ifFirst Financial Common Stock.
If the Merger was consummated on October 31, 1995.
41September 3, 1996, the Average would
be $33.125, the Exchange Ratio would be 3.751871 shares of First
Financial Common Stock for each share of Hastings Financial Common
Stock, and the number of shares of First Financial Common Stock to be
issued would be 301,887 shares.
39
4947
(B) The par value of BancorpFirst Financial Common Stock is $8.00 per share, while
the F&Mpar value of Hastings Financial Common Stock is without par. The$1.00 per share.
Assuming an Exchange Ratio of 3.751871, the additional par value of the
shares of BancorpFirst Financial Common Stock issued, in the aggregate, over
the par value of F&MHastings Financial Common Stock, in the aggregate, is
transferred from surplus, as shown in the table below:
F&M Retirement ofHastings Hastings
Financial Transfer from F&MFinancial
Actual Treasury Stock Surplus Pro Forma
------ ------- -------------- ------------- ---------
(In(Dollars in thousands)
Common stock $ 600 $ (37) $ 2,390 $ 2,95379 $2,336 $2,415
Surplus 1,200 (94) (2,390) (1,284)
Treasury stock, at cost (131) 131 0 0
------- ----- ------- -------731 (2,336) (1,605)
------ ------ ------
Total common stock and surplus $ 1,669810 $ 0 $ 0 $ 1,669
======= ===== ======= =======810
====== ====== ======
The consolidated pro forma shareholders' equity per share was
calculated assuming the issuance of 369,140301,887 shares of BancorpFirst Financial
Common Stock at an Average equal to $33.8625,$33.125, which is the Average that
would have been in effect if the Merger was effective October 31, 1995.September 3,
1996. The use of the number of shares is for illustrative purposes only
and does not attempt to predict the actual number of shares to be
issued in the Merger.
4240
5048
INFORMATION ABOUT BANCORPFIRST FINANCIAL
Information about BancorpFirst Financial is included in the BancorpFirst Financial
Form 10-K, previously incorporated herein by reference, and in Bancorp'sFirst Financial's
Quarterly Report on Form 10-Q for the quarters ended March 31 and June 30, and September 30, 1995,1996,
previously incorporated herein by reference.
4341
5149
INFORMATION ABOUT THE BUSINESS OF F&MHASTINGS FINANCIAL
General
F&M,- -------
Hastings Financial, a bank holding company, was established in 19841988 and
is headquartered in Rochester, Indiana,Hastings, Michigan, the county seat of FultonBarry County. The
holding company's wholly owned subsidiary, Farmers & MerchantsNational Bank is a
state-chartered commercial bank,of Hastings, was
chartered by the StateOffice of Indianathe Comptroller of the Currency as a national bank in
1934.
Farmers & Merchants1933. National Bank of Hastings conducts its business through a main office
and drive-up
facility, both of which are located in Rochester, Indiana,Hastings, Michigan and a full service branch located in Kewanna, Indiana.Wayland,
Michigan. Its primary market area includes the cities of RochesterHastings and Kewanna, IndianaWayland
and the contiguous areaareas within Fulton County,
Indiana.Barry and Allegan Counties, Michigan. The
only commercial community banking operation in the Rochester area,
Farmers & Merchants'economic base of National Bank of Hastings' primary market area contains a diverse business and
economic base ofis primarily
agriculture, but also includes light manufacturing, recreational areas and
service companies and
farms.companies.
As of AprilJune 30, 1995, F&M1996, Hastings Financial had total assets of
$59.2approximately $47 million, and total deposits of $51.4approximately $41 million and
shareholders' equity of approximately $5 million. It had 3235 employees at October 31, 1995.
Farmers & MerchantsJune
30, 1996.
National Bank of Hastings has operated as a traditional community bank
since its founding. As with many community banks, its lending focus has been
strongly real estate-oriented.estate and installment lending oriented. At April 30,December 31, 1995,
approximately 59.3%48.7% and 47.9% of its lending portfolio was comprised of real
estate loans.and installment loans, respectively. The balance of its loan portfolio is
comprised primarily of consumer and commercial loans. Lendable funds are obtained primarily
from deposits and loan principal payments. Farmers &
MerchantsNational Bank of Hastings offers a
full line of checking and NOW accounts, passbook savings, certificates of
deposit and individual retirement accounts. In addition to originating loans,
Farmers & MerchantsNational Bank of Hastings invests in U.S. treasury and government agency
securities, corporate notes and municipal securities.
Competition
Farmers & Merchants- -----------
National Bank of Hastings competes for deposits with other commercial
banks, savings associations, savings banks, credit unions and with issuers of
commercial paper and other securities, such as shares in money market mutual
funds. The primary factors in competing for deposits are interest rates, service
and convenience of office location.
In making loans, Farmers & MerchantsNational Bank of Hastings competes with other
commercial banks, savings associations, savings banks, consumer finance
companies, credit unions, leasing companies, mortgage companies, and other
lenders. Farmers &
MerchantsNational Bank of Hastings competes for loan originations primarily
through the interest rates and loan fees it charges and through the efficiency
and quality of services it provides to borrowers. Competition is affected by,
among other things, the general availability of lendable funds, general and
local economic conditions, current interest rate levels and other factors which
are not readily predictable.
4442
5250
Regulation
F&M,- ----------
Hastings Financial, as a bank holding company, is subject to
supervision and/or regular examination by the Federal Reserve Board and the
Federal Deposit Insurance Corporation (the "FDIC"). Farmers & Merchants,National Bank of Hastings,
as a state-charterednational bank, is subject to supervision and regular examination by the
Indiana
DepartmentOffice of Financial Institutionsthe Comptroller of the Currency, as primary regulator, and by the
FDIC.FDIC, as backup regulator.
Properties
Farmers & Merchants- ----------
National Bank of Hastings operates a main office and drive-up facility in Rochester, IndianaHastings, Michigan
and a branch office in Kewanna, Indiana.Wayland, Michigan. All offices are owned by Farmers & Merchants. F&MNational Bank
of Hastings. Hastings Financial does not directly own any real property.
Legal Proceedings
- -----------------
Neither F&MHastings Financial nor Farmers & MerchantsNational Bank of Hastings is presently
involved in any legal proceedings of a material nature. From time to time,
Farmers & MerchantsNational Bank of Hastings is a party to legal proceedings incidental to its
business to enforce its security interest in collateral pledged to secure loans
made by Farmers & Merchants.
45National Bank of Hastings.
Certain Transactions With Hastings Financial
- --------------------------------------------
At December 31, 1995, certain directors and executive officers of
Hastings Financial and members of the immediate families of such directors and
executive officers were indebted to National Bank of Hastings in the aggregate
amount of approximately $175,000. Such indebtedness was incurred in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons. All such loans were current at December 31, 1995 and June 30,
1996 and are not considered to involve more than the normal risk of
collectibility or to present other unfavorable features.
43
5351
Selected Financial Data
- -----------------------
The following table sets forth certain information concerning the
financial condition, earnings and other data regarding F&MHastings Financial at the
dates and for the periods indicated:
Financial condition At AprilJune 30, At December 31,
and other data: ------------------------------------------------------------------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------------------------------------------------------------------- ----------------------------------------------
(Dollars in thousands)
Total amount of:
Assets $59,186 $60,949 $63,045 $59,458 $55,519$46,847 $44,489 $46,140 $45,797 $44,690 $46,556 $39,576
Investment securities:
Held-to-maturity 21,352 23,151 23,476 22,854 19,62710,428 11,704 10,767 13,292 18,497 17,009 11,611
Available-for-sale 2,775 2,9401,632 2,097 1,655 4,578 0 0 0
Loans receivable, net of
unearned income, and
deferred
loan fees 31,981 28,850 31,735 32,367 31,170and allowance
for loan losses 26,826 23,970 24,964 23,154 18,701 19,668 21,105
Deposits 51,424 53,591 55,903 53,051 49,11240,736 38,994 40,442 39,958 39,644 41,780 35,225
Shareholders' equity 7,397 7,040 6,651 5,953 5,8955,280 4,756 4,914 4,571 4,368 4,085 3,872
Six months ended
Earnings and other June 30, Year ended April 30,December 31,
data: ------------------------------------------------------------------------ -------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------------------------------------------------------------------ -------------------------------------------------
(Dollars in thousands, except per share data)
Interest income $ 4,382 $ 4,657 $ 5,082 $5,241 $4,884$1,632 $1,493 $3,005 $2,906 $2,917 $3,256 $3,387
Interest expense 1,743 1,994 2,428 2,786 2,742
------- ------- -------560 523 1,075 1,009 1,056 1,349 1,645
------ ------ ------ ------ ------ ------ ------
Net interest income 2,639 2,663 2,654 2,455 2,1421,072 970 1,930 1,897 1,861 1,907 1,742
Provision for
loan losses 184 408 86 512 145
------- ------- -------9 3 34 3 0 5 25
------ ------ ------ ------ ------ ------ ------
Net interest income
after provision for
loan losses 2,455 2,255 2,568 1,943 1,9971,063 967 1,896 1,894 1,861 1,902 1,717
Other income 297 297 313 312 321194 255 469 317 280 295 289
Other expenses 1,903 1,832 1,774 1,801 1,684
------- ------- -------775 794 1,561 1,670 1,510 1,484 1,464
------ ------ ------ ------ ------ ------ ------
Earnings before
income taxes and
cumulative effect of change
in accounting principle 849 720 1,107 454 634482 428 804 541 631 713 542
Income taxes 223 148 263 208 200
------- ------- -------146 100 188 138 219 198 166
------ ------ ------ ------ ------ ------ ------
Net earnings $ 626336 $ 572328 $ 844616 $ 246403 $ 434
======= ======= =======412 $ 515 $ 376
====== ====== ====== ====== ====== ====== ======
Net earnings per share $111.12 $101.55 $149.89 $43.60 $76.18
======= ======= =======$ 4.41 $ 4.26 $ 8.10 $ 5.08 $ 5.23 $ 6.57 $ 4.77
====== ====== ====== ====== ====== ====== ======
Dividends per share $ 30.001.25 $ 26.000.00 $ 26.00 $26.00 $26.002.25 $ 1.75 $ 1.65 $ 1.65 $ 1.65
Return on equity (net
earnings divided by
average equity) 8.41% 8.22% 13.04% 4.11% 7.50%13.18%(1) 14.07%(1) 12.98% 8.49% 9.21% 12.57% 9.43%
Return on assets (net
earnings divided by
average total assets) 1.03% 0.90% 1.34% 0.43% 0.81%1.45%(1) 1.45%(1) 1.37% 0.89% 0.92% 1.20% 0.97%
Dividend payout ratio
(dividends declared
per share divided by
net earnings per
share) 28.34% N/A 27.78% 34.45% 31.55% 25.11% 34.59%
Book value per common
share $66.45 $63.02 $65.12 $58.33 $55.74 $52.12 $49.41
Average shareholders'
equity to average
total assets 10.96% 10.33% 10.58% 10.47% 10.00% 9.45% 10.23%
- ------
(1) Annualized
4644
5452
Analysis Of Net Interest Income
- -------------------------------
The following table sets forth for the years ended April 30,December 31, 1995,
1994 and 1993 the average balances of major categories of interest earning
assets and interest bearing liabilities, interest income earned and interest
expense paid during such periods and the related weighted average rates for
F&M.Hastings Financial.
Year ended April 30,
-----------------------------------------------------------------December 31,
1995 1994 1993
----------------------------- ------------------------------ ------------------------------------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ---- ------- ---- ----
(Dollars in thousands)
Interest-earning assets:
Loans receivable (1) $30,358 $ 2,933 9.66% $30,21223,691 $ 3,079 10.19%2,137 9.02% $19,958 $1,833 9.18% $18,696 $1,798 9.62%
Investment securities:
Taxable 19,405 1,036 5.34% 19,037 1,120 5.88%11,161 617 5.53% 14,032 811 5.78% 14,041 894 6.37%
Tax-exempt (2) 6,345 566 8.92% 5,171 474 9.16%3,059 234 7.65% 4,353 291 6.69% 4,165 226 5.43%
Federal funds sold 728 40 5.46% 4,709 146 3.10%1,687 97 5.75% 1,693 70 4.13% 2,389 76 3.18%
------- ------ ---------- ------- ------ -------
------- ------
Total interest-earning assets 56,836 4,575 8.05% 59,129 4,819 8.15%39,598 3,085 7.79% 40,036 3,005 7.51% 39,291 2,994 7.62%
Noninterest-earning assets:
Allowance for loan losses (545) (537)(174) (174) (195)
Other 4,644 5,079
-------5,423 5,465 5,664
-------- -------- -------
Total assets $60,935 $63,671
=======$ 44,847 $ 45,327 $44,760
======== ======== =======
Interest-bearing liabilities:
Demand deposits $11,956 290 2.43% $12,779 313 2.45%$ 12,471 428 3.43% $13,716 408 2.97% $13,743 411 2.99%
Savings deposits 8,314 227 2.73% 7,593 207 2.73%11,018 299 2.71% 11,340 308 2.72% 10,978 309 2.81%
Time deposits 26,056 1,220 4.68% 29,912 1,469 4.91%6,974 347 4.98% 7,446 293 3.93% 8,160 336 4.12%
Federal fundsFunds purchased 87 6 7.07%8 1 12.50% 3 0 0.00% 0 0 0.00%
Capital lease obligations 0 0 0.00% 46 5 11.54%
------- ------- ------ ------- ------ ------- ------
Total interest-bearing liabilities 46,413 1,743 3.75% 50,330 1,994 3.96%30,471 1,075 3.53% 32,505 1,009 3.10% 32,881 1,056 3.21%
------- ------ ------- ------
Noninterest-bearing liabilities
7,083 6,385Noninterest-bearing demand deposits 8,763 7,370 6,759
Other liabilities 867 706 645
------- ------------- -----
Total liabilities 53,496 56,71540,101 40,581 40,285
Stockholders' equity 7,439 6,9564,746 4,746 4,475
------- ------ -------
Total liabilities and
stockholders' equity $60,935 $63,671$ 44,847 $ 45,327 $ 44,760
======= ============= ==========
Net interest income;
interest rate spread $ 2,832 4.30%2,010 4.26% $ 2,825 4.19%1,996 4.41% $1,938 4.41%
======= =========== ======== ======= ====== =====
Net interest margin (net interest
income as a percent of average
interest-earning assets) 4.98% 4.78%
=====5.08% 4.99% 4.93%
======= ====== ======
Average interest-earning assets to
average interest-bearing liabilities 122.5% 117.5%
====== ======
Year ended April 30,
--------------------------------
1993
--------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Paid Rate
Interest-earning assets:
Loans receivable130.0% 123.2% 119.5%
===== ===== =====
------------------
(1) $32,470 $ 3,470 10.69%
Investment securities:
Taxable 18,594 1,242 6.68%
Tax-exempt (2) 4,459 403 9.03%
Federal funds sold 3,348 105 3.13%
------- ------- ------
Total interest-earning assets 58,871 5,220 8.87%
Noninterest-earning assets:
Allowance forFor purposes of these computations, nonaccrual loans are included in the average loan losses (487)
Other 4,466
-------
Total assets $62,850
=======
Interest-bearing liabilities:
Demand deposits $11,601 342 2.95%
Savings deposits 6,678 218 3.26%
Time deposits 32,762 1,836 5.61%
Federal funds purchased 0 0 0.00%
Capital lease obligations 259 32 12.21%
------- ------- ------
Total interest-bearing liabilities 51,300 2,428 4.73%
------- ------
Noninterest-bearing liabilities 5,073
-------
Total liabilities 56,373
Stockholders' equity 6,477
-------
Total liabilitiesbalances outstanding and stockholders' equity $62,850
=======
Netloan fees are
included in interest income;
interest rate spread $ 2,792 4.14%
======= ======
Net interest margin (net interest income ason loans receivable. The inclusion of nonaccrual loans and fees does not have a percent ofmaterial effect on
either the average interest-earning assets) 4.74%
======
Average interest-earning assets tobalance or the average interest-bearing liabilities 114.8%
======
- --------------------
(1) For purposes of these computations, nonaccrual loans are included in the
average loan balances outstanding.yield.
(2) Interest income on tax-exempt investments has been adjusted to a taxable equivalent basis using a marginal federal income tax
rate of 34.0%.
47
45
5553
Interest Income And Expense Rate/Volume Analysis
- ------------------------------------------------
The table below describes the extent to which changes in interest rates
and changes in the volume of interest earning assets and interest bearing
liabilities have affected F&M'sHastings Financial's interest income and expense
during the periods indicated. For each category of interest earning assets and
interest bearing liabilities, information is provided on changes attributable to
(i) changes in volume (change in volume multiplied by prior year rate), (ii)
changes in rate (change in rate multiplied by prior year volume) and (iii) total
changes in rate and volume. The combined effects of changes in both volume and
rate, which cannot be separately identified, have been allocated proportionately
to the change due to volume and the change due to rate.
Year ended April 30,
-------------------------------------------------------------December 31,
-------------------------------------------------
1995 vs. 1994 1994 vs. 1993
---------------------------- ----------------------------------------- -------------
Increase (decrease) Increase (decrease)
due to due to
----------------- ----------------------- ------
Volume Rate Total Volume Rate Total
------ --------- ----- ------ ---- -----
-----
(In Thousands)(Dollars in thousands)
Interest income attributable to:
Interest income attributable to:
Loans receivable $ 15 $(161) $(146) $(234) $(157) $(391)336 $ (32) $ 304 $ 105 $(70) $ 35
Investment securities:
Taxable 21 (105) (84) 29 (151) (122)(160) (34) (194) (1) (82) (83)
Tax-exempt (1) 105 (13) 92(111) 54 (57) 11 54 65 6 71
Federal funds sold (173) 67 (106) 42 (1) 410 27 27 (25) 19 (6)
----- ----- ----- ----- ----- --------- ----
Total interest income (32) (212) (244) (98) (303) (401)65 15 80 90 (79) 11
Interest expense attributable to:
Interest-bearing demand deposits (20)(29) 49 20 (1) (2) (3) (23) 33 (62) (29)
Savings deposits 20(9) 0 20 28 (39)(9) 10 (11) (1)
Time deposits (183) (66) (249) (152) (215) (367)(17) 71 54 (29) (14) (43)
Federal funds purchased 6 0 61 1 0 0 0
Capital lease obligations (3) (2) (5) (25) (2) (27)
----- ----- ----- ----- ----- --------- ----
Total interest expense (180) (71) (251) (116) (318) (434)(55) 121 66 (20) (27) (47)
----- ----- ----- ----- ----- --------- ----
Increase (decrease) in net
interest income $ 148 $(141)120 $(106) $ 714 $ 18110 $(52) $ 15 $ 3358
===== ===== ===== ===== ===== =====
--------------------==== ====
- ----------------
(1) Interest income on tax-exempt investments has been adjusted to
a taxable equivalent basis using a marginal federal income tax
rate of 34.0%.
Investment Securities
- ---------------------
The following table sets forth the carrying amount of investment
securities at April 30,December 31, 1995 and 1994:1994. Investment securities classified as
held-to-maturity are recorded at amortized cost and those classified as
available-for-sale are recorded at fair value.
Held-to-Maturity Available-for-Sale
April 30, April 30,
--------------------- ----------------------------------- ------------------
December 31, December 31,
------------ ------------
1995 1994 1995 1994
--------------- -------- ------- ------
------
(In(Dollars in thousands)
U.S. Treasury securitiestreasury and
government agencies $ 07,510 $ 500 $ 0 $ 0
U.S. Government agencies 13,988 15,069 2,775 2,9409,945 $1,436 $1,870
Obligations of states and
political subdivisions 6,861 6,8192,907 2,981 0 02,500
Other corporate securities 503 763251 254 219 208
Mortgage-backed securities 99 112 0 0
------- ------- ------ ------
Total $21,352 $23,151 $2,775 $2,940$10,767 $13,292 $1,655 $4,578
======= ======= ====== ======
4846
5654
The following table presents the contractual maturities or terms to
repricing of investment debt securities and the weighted average yield at
April
30,December 31, 1995.
Due 0-1 year Due 1-5 years Due 5-10 years Due after 10
after after after years after
4-30-95 4-30-95 4-30-95 4-30-9512-31-95 12-31-95 12-31-95 12-31-95 Totals
-------------- --------------- -------------- -------------- ------------------------ -------- -------- -------- ------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------------- ----- ------ ----- ------ ----- ------ -----
(In(Dollars in thousands)
HELD-TO-MATURITY:
U.S. Government Agenciestreasury and
government agencies $ 999 4.76% $12,989751 6.85% $ 6,759 4.99% $ 0 0.00% $ 0 0.00% $ 7,510 5.18%
Obligations of states and
political subdivisions(1) 369 5.85% 1,149 7.35% 1,389 7.53% 0 0.00% 2,907 7.25%
Other corporate securities 251 8.35% 0 0.00% 0 0.00% 0 0.00% 251 8.35%
Mortgage-backed securities 0 0.00% 0 0.00% 0 0.00% 99 5.75% 99 5.75%
------- ------- ------- ------- -------
Total Held-to-Maturity $ 1,371 6.86% $ 7,908 5.33% $ 1,389 7.53% $ 99 5.75% $10,767 5.82%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
AVAILABLE-FOR-SALE:
U.S. treasury and
government agencies $ 465 7.86% $ 971 4.70% $ 0 0.00% $ 0 0.00% $ 1,436 5.72%
Other corporate securities 0 0.00% 219 8.46% 0 0.00% 0 0.00% 219 8.46%
------- ------- ------ ------- -------
Total Available-for-Sale $ 465 7.86% $ 1,190 5.39% $ 0 0.00% $ 0 0.00% $13,988 5.35%
Obligations of states and
political subdivisions(1) 421 6.77 1,637 9.14 2,549 8.97 2,254 8.94 6,861 8.87
Other securities 503 7.02 0 0.00 0 0.00 0 0.00 503 7.02
------ ---- ------- ---- ------ ---- ------ ---- ------- ----
Total Held-to-Maturity $1,923 5.79% $14,626 5.80% $2,549 8.97% $2,254 8.94% $21,352 6.51%$ 1,655 6.08%
======= ===== ======= ===== ====== ========= ======= ==== ====== ==== ====== ========= ======= ====
AVAILABLE-FOR-SALE:
U.S. Government agencies $ 0 0.00% $ 2,775 4.81% $ 0 0.00% $ 0 0.00% $ 2,775 4.81%
====== ==== ======= ==== ====== ==== ====== ==== ======= ====
=====
- --------------------
(1) Yields on tax-exempt investments have been computed on a tax equivalent
basis using a marginal federal income tax rate of 34.0%.
At April 30,December 31, 1995 there were no holdings of securities of any one
issuer, other than the U.S. Governmentgovernment and its agencies and corporations, in an
amount greater than 10% of shareholders' equity.
Loan Portfolio
- --------------
LOAN PORTFOLIO COMPOSITION. F&M'sHastings Financial's primary lending area
are the cities of RochesterHastings and Kewanna, IndianaWayland, Michigan and the contiguous area in
Fulton County,
Indiana.Barry and Allegan Counties, Michigan.
The following table presents certain information in respect of the
composition of F&M'sHastings Financial's loan portfolio at the dates indicated:
At April 30,
---------------------December 31,
---------------
1995 1994
------- -------
(In---------- --------
(Dollars in thousands)
Commercial &and agricultural $ 6,810695 $ 6,711517
Real estate-construction 175 1830 0
Real estate-mortgage 18,778 16,24412,249 12,558
Installment 6,218 5,71212,057 10,052
Other 163 203
------- -------
Total loans 31,981 28,85025,164 23,330
Allowance for loan losses 643 602(200) (176)
------- -------
Net loans $31,338 $28,248$24,964 $23,154
======= =======
At December 31, 1995, Hastings Financial did not have any
concentrations of loans exceeding 10.0% of total loans not otherwise disclosed
in the loan categories in the table above.
47
55
LOAN MATURITY SCHEDULE. The following table sets forth certain
information at April 30,December 31, 1995 regarding loans, excluding real
estate-mortgage, installment and other, maturing or repricing in F&M'sHastings
Financial's portfolio, based on the earlier of contractual terms to maturity or
the next scheduled repricing date for variable rate loans:
Due 0-1 year Due 1-5 years Due 5-10 years Due after 10
after after after years after
4-30-95 4-30-95 4-30-95 4-30-9512-31-95 12-31-95 12-31-95 12-31-95 Total
------------ ------------- -------------- ------------ ------
(In-------- -------- -------- -------- -----
(Dollars in thousands)
Commercial and agricultural $4,830 $1,415 $565 $0 $6,810
Real estate-construction 175$ 695 $ 0 $ 0 $ 0 175
------ ------ ---- -- ------
Total $5,005 $1,415 $565 $0 $6,985
====== ====== ==== == ======$ 695
======= ======= ======= ======= =======
49
57
The following table sets forth the dollar amount of all loans
due after one year after April 30,December 31, 1995 that have predetermined interest
rates and have floating or adjustable interest rates:
Predetermined Floating or
rates adjustable rates
------------------ ----------------
(In(Dollars in thousands)
Commercial &and agricultural $1,980 $0
Real estate-construction$ 0 $ 0
------ --
Total $1,980 $0
====== ========= =======
DELINQUENT LOANS AND NONPERFORMING ASSETS. All loans are reviewed on a
regular basis and are placed on non-accrual status when, in the opinion of
management, the collection of interest is doubtful. Loans are classified as
restructured when management, to protect its investment, grants concessions that
would not otherwise be considered to a debtor. Other real estate owned ("OREO")
represents real estate acquired by F&MHastings Financial as a result of loan
defaults by customers. The following table summarizes F&M'sHastings Financial's
nonaccrual loans, restructured loans, OREO and past due loans at April 30,December 31,
1995 and 1994:
At April 30,
------------------December 31,
---------------
1995 1994
---- ----
(In(Dollars in thousands)
Nonaccrual loans $646 $527$ 29 $ 0
Restructured loans 0 0
Other real estate owned 0 128
---- ----57
------ ------
Total nonperforming assets $646 $655
==== ====$ 29 $ 57
====== ======
Accruing loans past due
90 days or more $192 $140
==== ====$ 3 $ 62
====== ======
Interest income which would have been recorded under the original terms
of nonaccrual loans and the interest income actually recognized are summarized
below:
Year ended April 30,December 31,
1995 1994
---- ----
(In(Dollars in thousands)
Interest income which would
have been recorded $59 $57$ 3 $ 0
Interest income recognized 2 0
0
--- --------- ------
Interest income foregone $59 $57
=== ===$ 1 $ 0
====== ======
At April 30,December 31, 1995 F&MHastings Financial did not have any loans not
currently classified as nonaccrual or 90 days past due and accruing where known
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of such borrowers to comply with the
present loan repayment terms and which may result in future disclosure of such
loans.
48
56
ALLOWANCE FOR LOAN LOSSES. F&MHastings Financial maintains an allowance to
absorb anticipated losses on loans. Additions to the allowance for loan losses
are charged to the provision for loan losses on the statement of income.
Management reviews on a quarterly basis the allowance for loan losses as it
relates to a number of relevant factors, including, but not limited to, trends
in the level of nonperforming assets, current and anticipated economic
conditions in the primary lending area, past loss experience, loan
concentrations, composition of the loan portfolio and possible losses arising
from specific problem loans. While management believes that it uses the best
information available to determine the allowance for loan losses, unforeseen
market conditions could result in adjustments and net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in evaluating the adequacy of the allowance for loan losses.
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58
The following table sets forth an analysis of F&M'sHastings Financial's
allowance for loan losses for the periods indicated:
Year ended April 30,
---------------------------------December 31,
-----------------------
1995 1994 1993
---- ---- ----
(In(Dollars in thousands)
Balance at beginning of period $602 $489 $491$176 $ 167 $198
Charge-offs:
Commercial and agricultural 0 0 28 243 42
Real estate-construction 0 0 0
Real estate-mortgage 76 16 310 0 0
Installment 105 99 1128 11 8
---- --------- ----
Total charge-offs 209 358 15718 11 36
Recoveries:
Commercial and agricultural 8 2 270 12 4
Real estate-construction 0 0 0
Real estate-mortgage 2 22 140 0
Installment 56 39 286 5 1
---- --------- ----
Total recoveries 66 63 698 17 5
Net charge-offs (recoveries) 143 295 8810 (6) 31
Provision for loan losses 184 408 8634 3 0
---- --------- ----
Balance at end of period $643 $602 $489$200 $ 176 $167
==== ========= ====
Ratio of net charge-offs (recoveries)
during the period to average loans
outstanding during the period 0.47% 0.98 0.04% (0.03)% 0.27%0.16%
==== ========= ====
The following table provides an allocation of F&M'sHastings Financial's
allowance for loan losses by category for the periods indicated. The allowance
can be allocated by category only on an approximate basis. The allocation of
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
Percentage of Loans
Allowance for Loan Losses to Total Loans
At April 30,December 31, At December 31,
--------------- ---------------
1995 1994 1995 1994
---- ---- (In---- ----
(Dollars in thousands)
Commercial and agricultural $158 $253$ 38 $ 9 2.76% 2.21%
Real estate-construction 0 0 0.00% 0.00%
Real estate-mortgage 262 18773 39 48.68% 53.83%
Installment loans 129 989 8 47.91% 43.09%
Other 0 0 0.00% 0.00%
Unallocated 94 64
---- ----80 120 0.65% 0.87%
------ ------ ------- -------
Total $643 $602
==== ====$ 200 $ 176 100.00% 100.00%
====== ====== ======= =======
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57
Deposits
- --------
Deposits have traditionally been the primary source of F&M'sHastings
Financial's funds for use in lending and other investment activities. Deposits
are attracted principally within the cities of RochesterHastings and Kewanna, IndianaWayland, Michigan
and the contiguous area in Fulton County, IndianaBarry and Allegan Counties, Michigan through the
offering of a broad selection of deposit instruments, including checking and NOW
accounts, money market deposit accounts, regular passbook savings accounts, term
certificate accounts and retirement savings plans. F&MHastings Financial has not
and does not presently use brokers to attract deposits.
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59
The following table presents the average balance of and the average
rate paid on various deposit categories for the periods indicated:
Year ended April 30,
---------------------------------------------December 31,
-----------------------
1995 1994
---------------------- ---------------------- ----
Average Average Average Average
Balance Rate Balance Rate
------- ------------- ------- -------
(In----
(Dollars in thousands)
Noninterest bearing demand deposits $ 6,7038,763 $ 6,0307,370
Interest bearing demand deposits 11,956 2.43% 12,779 2.45%12,471 3.43% 13,716 2.97%
Savings deposits 8,314 2.73 7,593 2.7311,018 2.71 11,340 2.72
Time deposits 26,056 4.68 29,912 4.916,974 4.98 7,446 3.93
------- -------------- ------- ---------
Total $53,029 3.27% $56,314 3.53%$39,226 2.74% $39,872 2.53%
======= ============== ======= =========
The following table presents the amount of F&M'sHastings Financial's time
deposits of $100,000 or more by the time remaining until maturity as of April 30,December
31, 1995:
Maturity April 30,December 31, 1995
-------- --------------
(In-----------------
(Dollars in thousands)
Three months or less $ 350264
Over three through six months 1000
Over six through twelve months 100360
Over twelve months 5600
------
Total $1,110$ 624
======
Return On Equity And Assets
- ---------------------------
The following table sets forth certain performance ratios of F&MHastings
Financial for the periods indicated:
Year ended April 30,
----------------------December 31,
-----------------------
1995 1994
------ ---------- ----
Return on assets (net income
divided by average total assets) 1.03% 0.90%1.37% 0.89%
Return on equity (net income
divided by average equity) 8.41% 8.22%12.98% 8.49%
Dividend payout ratio (dividends
declared per share divided by
net income per share) 27.00% 25.60%27.78% 34.45%
Equity to assets ratio (average
equity divided by average assets) 12.21% 10.92%10.58% 10.47%
5250
60
INFORMATION ABOUT THE MANAGEMENT OF F&M
F&M's Board Of Directors
F&M currently has a Board of Directors consisting of seven persons,
each serving for a term of one year. The following persons are serving on F&M's
Board of Directors:
Year First Term
Name Age(1) Elected Director Expires
---- ------ ---------------- -------
WENDELL B. BEARSS 65 1987 1996
Farmer
H. ROBERT BRADLEY 77 1958 1996
Retired Farmer
CAROL J. BRIDGE 56 1987 1996
Secretary-Treasurer,
Rochester Telephone Company
WILLIAM J. GORDON 60 1987 1996
President/CEO of F&M and
Farmers & Merchants Bank
J. FREDERICK HOFFMAN 73 1990 1996
Partner, Law firm of
Hoffman, Luhman & Busch
ROBERT E. PETERSON 65 1984 1996
Chairman of the Board of F&M/
Senior Partner, Law Firm of
Peterson & Waggoner
V. LORENE RAUSCHKE 73 1975 1996
Retired
-------------------------
(1) As of October 31, 1995.
Board Meetings And Committees
The Board of Directors meets the second Wednesday of each month for
regular meetings. Additional special meetings may also be held from time to
time. During the year ended April 30, 1995 the Board of Directors met 12 times
for regular and special meetings.
The Board of Directors has the following committees:
Committee Members Function
-------------------- -------------------- -----------------------------------------------------------
Trust All Directors Meets monthly after regular board meeting to review all
trust activity and specific accounts.
Loan William J. Gordon Meets on an as-needed basis to review and act upon loan
Wendell B. Bearss requests of $50,000 or more. The committee also makes
V. Lorene Rauschke recommendations to the full board of directors when
Robert E. Peterson necessary.
Asset & Liability William J. Gordon Meets monthly to discuss and monitor Farmers & Merchants
Management V. Lorene Rauschke rate sensitive assets and liabilities. This committee also
Wendell B. Bearss adjusts the rates of such assets and liabilities. The
following F&M and/or Farmers and Merchants officers,
who are not members of the Board of Directors, are also
members of this committee: Michael R. Terrone, George
R. Hoover, Harry J. Richter and Dean A. Dolph.
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61
Community Reinvestment William J. Gordon Meets on an as needed basis to monitor Farmers & Merchants
Act V. Lorene Rauschke compliance with the Community Reinvestment Act, the intent
Wendell B. Bearss of which is to encourage financial institutions to assess
and meet the credit needs of their local communities,
including low to moderate income areas. The following F&M
and/or Farmers and Merchants officers, who are not members
of the Board of Directors are also members of this
committee: Michael R. Terrone, George R. Hoover, Harry J.
Richter and Dean A. Dolph.
Salary Carol J. Bridge Meets annually to review bank staff evaluations and
J. Frederick Hoffman and appraisals and to make wage adjustments. Michael R.
Terrone, who is an officer of F&M and Farmers & Merchants
but not a member of the Board of Directors, is also a
member of this committee.
Compliance & Audit Robert E. Peterson This committee is a temporary committee formed in August
V. Lorene Rauschke 1993 to monitor compliance with the terms of a Memorandum
Wendell B. Bearss of Understanding ("MOU") entered into with the Indiana
Carol J. Bridge Department of Financial Institutions and the FDIC. The
committee met monthly during the period that the MOU was in
effect. The FDIC released Farmers & Merchants from the
requirements of the MOU in June 1994 and the Indiana
Department of Financial Institutions released Farmers &
Merchants from the terms of the MOU in November 1994, at
which time this committee became inactive. For more
information about the MOU, see note 11 to the April 30,
1995 Consolidated Financial Statements of F & M Bancorp and
Subsidiary.
Each director attended at least 75% of the aggregate of the meetings of
the Board of Directors and the meetings of committees of the Board of Directors
on which he/she served.
Director Compensation
During the twelve months prior to December 31, 1994, each director
received an annual fee of $3,600 for serving on the Board of Directors. Members
of the Loan Committee received an additional $1,000 for serving on that
committee and members of the Compliance & Audit Committee received an additional
$1,500.
Executive Officers Of F&M
The table below sets forth certain information with respect to the
executive officers of F&M with additional information being provided in the
following narrative section on each officer.
Name Age(1) Position with F&M
------------------------- ------ -----------------
Robert E. Peterson 65 Chairman of the Board
William J. Gordon 60 President/CEO
George R. Hoover 57 Secretary-Treasurer
Michael R. Terrone 48 Vice President
-------------------------
(1) As of October 31, 1995.
54
62
ROBERT E. PETERSON was first elected to F&M's Board of Directors in
1984 and became Chairman in June 1995. Mr. Peterson is a senior partner of the
law firm of Peterson & Waggoner, where he has been affiliated for thirty years.
He was an Indiana State Senator from 1961 to 1968 and from 1977 to 1980. He was
Assistant Minority Leader during 1979 and 1980. He was also Fulton County
Auditor from 1957 to 1960 and was a farmer from 1954 to 1956. Mr. Peterson is a
veteran of the Korean War. He graduated from Purdue University in 1952 with a
Bachelor of Science Degree in Agriculture and earned a Doctor of Jurisprudence
degree in 1964 from Indiana University. He is a member of the Fulton County,
Indiana State and American Bar Associations and was a member of the Indiana Bar
Association's Board of Managers from 1983 to 1985. Mr. Peterson is a member of
the First Baptist Church and is a former member of the State Board of Managers
for the Judian Association of American Baptist Churches. He is a member and
former lieutenant governor of the Rochester Kiwanis and is also a former
president of the Indiana University Law Alumni Association. He is also a member
of the Masonic Lodge, American Legion, VFW and Indiana Historical Society.
WILLIAM J. GORDON started his banking career at Farmers & Merchants in
October 1959 as a teller. He held the positions of Assistant Cashier, Cashier,
Vice President and Senior Vice President before his appointment in June 1995 as
President and CEO of F&M and Farmers & Merchants. He is a member and past
president of the Rochester Rotary Club and is a member of the Rochester Elks
Lodge, Rochester Moose Lodge, Rochester High School Athletic Boosters and the
Rochester Chamber of Commerce. Mr. Gordon is a member of the First Christian
Church, where he has served as a deacon and elder and is a 35 year member of the
church choir.
GEORGE R. HOOVER joined Farmers & Merchants as a teller in February
1969. He has served as Assistant Cashier and Cashier and was appointed to his
present position of Vice President-Cashier of Farmers & Merchants in April 1984.
He was appointed to the position of Secretary-Treasurer of F&M in September
1984. Mr. Hoover is a member of Grace United Methodist Church, where he is a
member of the church choir and is secretary of the Administration Board. He
previously served as financial secretary of Grace.
MICHAEL R. TERRONE joined Farmers & Merchants as Assistant Cashier in
July 1980. He was appointed to the position of Assistant Vice President of
Farmers and Merchants in January 1985 and was appointed a Vice President of F&M
in April 1988. Mr. Terrone is responsible for the overall daily operation of
F&M, including teller and branch operations, bookkeeping and lending functions.
Mr. Terrone has a Bachelor of Science Degree in Business Administration from the
University of Maryland and is a graduate of the Graduate School of Banking at
the University of Wisconsin. He is a current board member and past president of
Lake Manitou Association, Inc. and is a current board member and vice president
of the Rochester Athletic Booster Club. Mr. Terrone is a current board member of
the Fulton Economic Development Commission. He is a past board member of the
Rochester & Lake Manitou Chamber of Commerce and a past treasurer of the
Rochester Kiwanis Club. He is also an instructor for the Junior Achievement of
Fulton County. He is a member of St. Joseph Catholic Church.
55
63
Executive Compensation
CASH COMPENSATION. No executive officer of F&M other than Richard
Mitchell received more than $100,000 in salary and bonus payments during the
year ended December 31, 1994. The following table sets forth certain information
as to the cash compensation received by Richard Mitchell, who retired as
President and CEO on June 20, 1995, during the nine months ended September 30,
1995 and the years ended December 31, 1994 and 1993.
SUMMARY COMPENSATION TABLE
Name and All Other
Principal Position Year Salary Bonus Compensation
------------------- ---- ------- ----- ------------
Richard Mitchell 1995 $46,042 $ 9,029 $25,000 (1)
Former President/CEO 1994 92,086 9,208 4,600 (2)
1993 89,400 9,835 4,600 (2)
--------------------
(1) Represents a retirement bonus.
(2) Represents fees received for serving on the Board of Directors and
the Loan Committee.
RETIREMENT PLAN. Farmers and Merchants sponsors a contributory target
benefit pension plan covering substantially all employees who meet certain age
and service requirements. Farmers and Merchants' contribution and expense for
the Retirement Plan are determined annually by a formula as defined in the plan.
After completion of five years of service, the Retirement Plan provides for a
100% vested interest. In general, distributions from the plan are made only at
retirement, death, disability, termination of employment or termination of the
Retirement Plan.
The following table sets forth the amounts that are payable to persons
in selected remuneration and service classifications under F&M's retirement
plan:
RETIREMENT PLAN TABLE
ESTIMATED ANNUAL BENEFITS (1) (2) (3)
Years of Service
-----------------------------------------------------------
Remuneration 15 20 25 30 35
------------ -------- -------- -------- -------- -------
$25,000 $ 4,875 $ 6,500 $ 8,125 $ 9,750 $11,375
$50,000 10,500 14,000 17,500 21,000 24,500
$75,000 16,125 21,500 26,875 32,250 37,625
$100,000 21,750 29,000 36,250 43,500 50,570
--------------------
(1) Pension amounts shown under the foregoing table are computed on a
straight-line annuity basis prior to deduction for Social
Security benefits. There is no Social Security benefit offset.
(2) The normal monthly retirement benefit at the normal retirement
age (65), effective January 1, 1994 is 1.0% of the average
monthly compensation multiplied by years of service (maximum of
35), plus .5% of average monthly compensation minus $833.33
($10,000 annually) multiplied by years of service (maximum of
35). Average monthly compensation is the average monthly
compensation for the highest five consecutive years which produce
the highest monthly average within the last ten years.
(3) Mr. Mitchell had 11 years of credited service at December 31,
1994 for the purposes of computing a benefit under this
Retirement Plan.
56
64
CERTAIN TRANSACTIONS WITH F&M
At April 30, 1995, certain directors and executive officers of Farmers
& Merchants and members of the immediate families of such directors and
executive officers were indebted to Farmers & Merchants in the aggregate amount
of $47,926, constituting all indebtedness outstanding to directors, executive
officers or their respective affiliates. Such indebtedness was incurred in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons. All such loans were current at April 30,
1995 and are not considered to involve more than the normal risk of
collectibility or to present other unfavorable features. No affiliate of F&M is
currently indebted to F&M or was indebted to F&M at April 30, 1995.
57
65
F & M BANCORP58
HASTINGS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONSof Financial Condition and Results of Operations
YEARS ENDED APRIL 30,DECEMBER 31, 1995, 1994 AND 1993
The followingThis discussion provides information about the Company'sconsolidated financial condition
and results of operations which may not otherwise be
apparent from the consolidated financial statements included elsewhere herein.
This discussionof Hastings Financial Corporation (the "Corporation")
and its subsidiary National Bank of Hastings (the "Bank"), and should be read in
conjunction with the consolidated financial
statements and the related footnotes.
Earnings SummaryConsolidated Financial Statements.
EARNINGS SUMMARY
- ----------------
Consolidated net income for F & M Bancorp (the "Company")of the Corporation for the year ended April 30,December 31, 1995
totaled $626,000 ($111.12 per share),was $616,000. This represented an increase of $54,000 or 9%53% over the $572,000 ($101.55prior year's net
income of $403,000. A comparison to 1993 net income of $412,000 further
illustrates the significance of 1995's net income growth. The earnings per share) earned duringshare
of $8.10 for the same
period in 1994. Theyear ended 1995 was an improvement of 59% over the 1994
earnings were lower than 1993 earnings of $844,000
($149.89 per share) by $272,000 or 32%. Cash dividends declared per share amounted to $30 inof $5.08. The year 1994 was a slight decrease from 1993's
earnings per share of $5.23.
Two often cited ratios for analysis of financial institutions are return on
average assets (ROA) and return on average equity (ROE). ROA was 1.37%, .89% and
.92% for the years ended December 31, 1995, and $26 in 1994 and 1993.
Results Of Operations - 1995 Versus 1994
Net interest income1993 respectively. ROE for
1995 was $2,639,000, a decrease12.98%, 1994 was 8.49% and 1993 was 9.21%.
RESULTS OF OPERATIONS: 1995 COMPARED TO 1994
- ----------------------
TOTAL INTEREST INCOME of $24,000 or
1%$3,005,000 for the calendar year 1995 was comparable to
the 1994 year of $2,906,000. However, the mix of interest income shifted as more
dollars came from loans (71% in) 1995 versus (63% in) 1994. This modest decrease in net interest income resulted from a
decrease in interest income of $276,000 offset by a decrease in interest expense
of $252,000. Although a small decrease in net interest income occurred in 1995
as compared to 1994, the net interest margin (on a tax equivalent basis)
improved to 4.98% in 1995 as compared to 4.78% in 1994 duechange was
primarily to a
reduction in lower yielding earning assets and maturities of higher rate time
deposits.
The overall yield on average earning assets in 1995 was 8.05% as
compared to 8.15% in 1994. The yields on loans and investment securities
decreased. These decreases were partially offset by an increase in the yield on
federal funds sold. In addition to a decrease in yields, average earning assets
(on a tax equivalent basis) decreased nearly 4% or $2,292,000 as compared to
1994. However, the decrease was only attributable to federal funds sold as loans
and investment securities had modest increases.
The decrease in interest expense of $252,000 is partially attributable
to a decrease in volume (accounting for $180,000) and partially attributable to
a decline in interest rates paid (accounting for $72,000). Average
interest-bearing liabilities declined $3,917,000 or nearly 8%, with time
deposits decreasing $3,856,000. Overall rates paid on interest-bearing
liabilities decreased from 3.96% in 1994 to 3.75% in 1995 with the decrease
principally related to time deposits.
Based on the current interest rate environment and the local
competition for deposits, management anticipates the net interest margin may
decline as higher yielding assets continue to pay down and are replaced with
lower yielding assets. In addition, the competition for deposits may not allow
for a similar decline in interest rates paid.
58
66
At April 30, 1995, net loans amounted to $31,338,000, an increase of
11% over net loans of $28,248,000 at April 30, 1994. The increase in loans was
funded by a decrease in cash and cash equivalents and a decrease in securities
held-to-maturity. Of the $3,090,000 increase in net loans, $2,527,000 was
related to net growth in real estate loans. Management expects loan demand to
continue as the local market has remained stable with little change in major
employers and their employee bases.
Securities totaled $24,127,000 at April 30, 1995 which represents a
decrease of $1,963,000 or 8% from total securities of $26,090,000 at April 30,
1994. The decrease in securities is the result of proceedsincreased principal balances of loans.
Interest income from maturities being
usedsecurities decreased from $1,003,000 during 1994 to
finance other needs and$771,000 for 1995, a change of 30%. Many of the securities in the portfolio were
variable rate products that produced higher yields, resulting from interest rate
markets rise from 1994 to 1995. However, this rise of interest rates could not
due to the sale of securities.
Total deposits at April 30, 1995 amounted to $51,424,000, a decrease of
$2,167,000 or 4% over total deposits of $53,591,000 at April 30, 1994. This
decrease was primarily through a $2,125,000 decrease in time deposits. The
decrease in deposits was financed in part through a decrease in cash and cash
equivalents and through the proceeds from maturities of investment securities. A
portion ofoffset the decline in average balances of securities from 1994 to 1995. This was
a conscious decision of management to move into higher yield earning assets
(loans).
INTEREST EXPENSE on deposits remained relatively flat from 1994 to 1995. Rates
to depositors and total average deposit balances fluctuated little between the
years. Growth of total deposits was a modest 1% from the 1994 year end to
December 31, 1995. There was a small shift of depositors moving from
shorter-term products to time deposits is believedcertificates but this did not measurably impact
interest expense.
PROVISION FOR LOAN LOSSES increased during 1995 to be attributablecorrespond to lower
rates offered on new certificates of deposits as compared to local competition.
Management believes that such run-off has been slowed or stabilized and
increased net interest income as most of these deposits were invested in
low-yielding overnight funds (federal funds sold).
The provision forthe loan losses which was charged to operations was based
on the growth
of the loan portfolio, the amountindirect installment lending.
51
59
Management adopted Statement of charge-offs incurred and
management's estimationFinancial Accounting Standards (SFAS) No. 114
Accounting by Creditors for Impairment of losses based on an evaluationa Loan, as amended by SFAS No. 118,
effective January 1, 1995. The adoption of portfolio risk and
economic factors. The provision for loan losses was $184,000 in 1995 as comparedthis pronouncement did not require
any adjustment to $408,000 in 1994, or a decrease of $224,000. The decrease in the loan loss
provision is partially a result of improved loss experience. Gross charge-offs
in 1995 were $209,000 as compared to 1994 amounts totaling $358,000, or a
decrease of $149,000. In 1994, one commercial credit incurred a charge-off of
$200,000. At April 30, 1995, the allowance for loan losses.
OTHER INCOME received a boost in 1995 though a $99,000 gain on a life insurance
policy. Security exchanges although small, improved to net gains of $1,000 in
1995 versus net losses of $9,000 in 1994. The volume of securities calls and
sales decreased from 1994 to 1995.
OTHER EXPENSES were reduced from 1994 to 1995 primarily by two factors: the
reduction of FDIC premiums that took place during 1995; and lower salaries,
wages and benefit expenses in 1995 attributable to a modest reduction in
workforce.
FEDERAL INCOME TAX EXPENSE increased with the rise of income before income
taxes. This increase was $643,000 or 2.01%partially offset by the $34,000 tax benefit associated
with the nontaxable gain on the life insurance policy discussed above.
RESULTS OF OPERATIONS: 1994 COMPARED TO 1993
- ----------------------
TOTAL INTEREST INCOME decreased from 1993's total of $2,917,000 to $2,906,000 in
1994, a decline of less than 1%. Conversely, the ratio of interest earning
assets to total loans, comparedassets was 88% at December 31, 1993 and 90% at December 31,
1994. The mix of interest earning assets moved from securities of 47% (of total
interest earning assets) at December 31, 1993 to $602,000 or 2.09%44% at December 31, 1994.
Correspondingly the lending mix increased from 1993 to 1994. A common ratio used
to determine the interest earning structure of a Bank is the loan to deposit
ratio. At December 31, 1993 this ratio was 47%, at December 31, 1994 the ratio
was 58%.
THE AVERAGE RATES for loan and security portfolios were at lower yields (after
tax adjustment) for the year 1994 versus 1993. The loan yields went from 9.62%
in 1993 to 9.18% in 1994. Taxable securities yields decreased from 6.37% in 1993
to 5.78% in 1994. Tax-exempt securities yields increased from 5.43% in 1993 to
6.69% in 1994.
INTEREST EXPENSE changed rather insignificantly from 1993 to 1994 as the total
loans at April 30,expense went from $1,056,000 to $1,009,000, a decrease of 4%. The average
balance of interest-bearing liabilities decreased minimally from 1993 to 1994
and the average rate decreased from 3.21% in 1993 to 3.10% in 1994. Non-performing loansThe change
in rates resulted from favorable competitive factors within the local and
national economies.
PROVISION FOR LOAN LOSSES was increased in 1994 from to $838,000 (or 2.6%1993. During 1993
management made the decision to reduce the year end balance of total loans) at
April 30, 1995 from $667,000 (or 2.3% of total loans) at April 30, 1994.
Management believes the allowance for
loan lossesloss reserve by not replenishing charged off loans. The purpose was to
bring the December 31, 1993 balance in line with the favorable delinquency and
non-accrual loan statistics at April 30, 1995 is
adequate to absorb losses that may occur on these and other loans.
Total non-interest income remained stable in 1995 as compared to 1994.
Service charges on deposits decreased 3%, or $5,000 to $193,000 in 1995 from
$198,000 in 1994.
Total non-interestthe 1993 year end. The slight increase of
provision expense increased $71,000 or 4% to $1,903,000 in
1995. This increaseduring 1994 was primarily a result of an increase in salaries and
employee benefits of $40,000 or 4%, occupancy expense of $26,000 or 13% and
other operating expenses of $45,000 or 23%, offset by a decrease of $35,000 or
63% in electronic data processing expenses due to certain capital lease
obligations on computer equipment expiring in 1994.
Income tax expense forloan growth during the year ended April 30, 1995 was $223,000,same year.
52
60
OTHER INCOME benefitted from an almost 11% increase of $75,000 or 51% from 1994. This increase is primarily due to an
increase in income before income taxes in 1995 as compared to 1994.
59
67
Results Of Operations - 1994 Versus 1993
Net interest income for 1994 was $2,663,000, an increase of $9,000 or
0.3% from 1993. This modest increase in net interest income resulted from a
decrease in interest expense of $434,000 and a decrease in interest income of
$425,000. In addition, the net interest margin (on a tax equivalent basis)
improved to 4.78%service charges in 1994
as compared to 4.74% in 1993. The overall yield earned on average earning assets in 1994 was 8.15% as
compared to 8.87% in 1993. The 1994 yield on each category of earning assets
declined from the 1993 levels. Average earning assets had a modest increase of
$256,000 compared to the prior year. However, the mix shifted from higher
earning loan assets (a decrease of $2,258,000) to lower earning assets such as
investment securities and federal funds sold.
The decrease in interest expense of $434,000primary reason for this is partially attributable
to a decrease in volume (accounting for $116,000) and partially attributable to
a decline in interest rates paid (accounting for $318,000). Average
interest-bearing liabilities declined $969,000 or nearly 2%. The mix of the
deposit base also shifted as average time deposits declined $2,850,000, which
was offset by increases in the average balances in lower rate interest-bearing
demand deposits and savings deposits. Overall rates paid on interest-bearing
liabilities decreased from 4.73% in 1993 to 3.96% in 1994.
The provision for loan losses which was charged to operations was based
on the amount of charge-offs incurred and management's estimation of losses
based on an evaluation of portfolio risk and economic factors. The provision for
loan losses was $408,000 in 1994 compared with $86,000 in 1993, or an increase
of $322,000. The increase in the loan loss provision is partially a result of
increased charge-offs. Gross charge-offs in 1994 were $358,000 as compared to
1993 amounts totaling $157,000, or an increase of $201,000. In 1994, one
commercial credit incurred a charge-off of $200,000. At April 30, 1994, the
allowance for loan losses was $602,000 or 2.09% of total loans compared to
$489,000 or 1.54% of total loans at April 30, 1993.
Non-performing loans increased modestly to $667,000 at April 30, 1994
from $644,000 at April 30, 1993. Management believes the allowance for loan
losses balance at April 30, 1994 is adequate to absorb losses that may occur on
these and other loans.
Total non-interest income remained relatively constant, declining by 5%
from $313,000 in 1993 to $297,000 in 1994. However, service charges on deposits,
the major component of non-interest income, increased 9% or $17,000 to $198,000
in 1994 from $181,000 in 1993. This is primarily due to an increase
in transaction-based accounts.
Total non-interest expense increased $58,000 or 3% to $1,832,000 in
1994. In 1994, losses on the salebalance and number of assets were $38,000 and no suchaccounts with service charges. Fees associated with
these accounts remained relatively unchanged. Security losses were incurredrelatively
unchanged from 1993 to 1994 while the volume of calls and sales of securities
was also comparably flat from year to year.
OTHER EXPENSES increased by 11% from 1993 to 1994. The primary factor for this
was an 87% increase ($128,000) in 1993.
Income taxpension and other employee benefits expense.
Most other categories of expenses showed little change from 1993 to 1994. The
increase in pension and employee benefits expense was primarily attributable to
increased expense related to a reduction in the retirement age from 65 in 1993
to 60 in 1994 for the year ended April 30,Bank's Selective Retirement Plan.
FEDERAL INCOME TAXES was reduced from $219,000 in 1993 to $138,000 in 1994, was $148,000, a
decrease of $115,000 or 44% from 1993. This decrease is primarily attributable37%. Two factors contributed to a decrease inthis reduction of expense. The first
being the reduced amount of income before income taxes in 1994 as compared toversus 1993.
60
68
LiquiditySecond is the impact of increased tax-exempt interest in 1994.
LIQUIDITY:
- ----------
The CompanyCorporation manages its primary liquidity position through the Bank. The purpose of
liquidity management is to provide funding
at the lowest possible cost for anticipatedfund loan demand, and/or deposit run-off
that occurs inmeet the regular coursewithdrawal needs of
business. Such sourcescustomers and provide for operating expenses. Sources of liquidity are:are cash and
funds due from financial institutions, federal funds purchased, lines with correspondent bankssold, sale and/or maturity
of securities classified as available for sale, maturities of securities held to
maturity and maturitiesprincipal repayments on loans. Management believes its current
liquidity level is sufficient to meet anticipated growth.
The consolidated statements of cash flows indicates the concerted level of
emphasis management has placed upon maximizing interest income from the
securities held-to- maturity portfolio. At April 30, 1995, scheduled maturities
over the next twelve months total $1,923,000.
The Company manages a secondary liquidity position to provide funding
in the event of unanticipated loan demand and/or deposit run-off. Management
maintains approximately 12% or $2,775,000 of its securities portfolio as
available-for-sale as of April 30, 1995. This designation provides additional
liquidity to fund abnormal loan demand, or to manage unanticipated run-off of
deposits. These securities are readily marketable as they are U.S. federal
agency securities directly or indirectly guaranteed by the Federal government.
The following is a brief description of the sources and uses of funds
for the periods indicated:
During the year ended April 30, 1995, there was a net decrease of
$2,764,000 inearning
assets. While cash and cash equivalents. The major usesequivalents have fluctuated from a high of
cash during$8,240,000 at the period includedbeginning of 1993 to a low of $3,050,000 at year end 1994,
management has been structuring its balance sheet to increase the fundingoverall yield
of a $3,274,000 increaseinterest earning assets by investing in the origination of loans a
$2,168,000 decrease in deposits,from the
sale and a $1,488,000 purchasematurity of securities held-to-maturity. Major sources of funds consisted of:
$1,027,000 from operating activities and maturing securities of
$3,180,000.
During the year ended April 30, 1994, there was a net decrease of
$1,692,000 insecurities.
Liquid assets include cash and cash equivalents. The major uses of cash during
the period included the purchase ofequivalents, securities totaling $15,897,000available for sale
and loans held for sale (of which there were none). Core deposits are defined as
customer account balances that are loyal to a $2,312,000 decrease in deposits. Major sources ofparticular financial institution.
Core deposits exclude public funds were:
$1,098,000 from operating activities, maturing securities of
$13,151,000 and a decline in loans of $2,524,000.
During the year ended April 30, 1993, there was a net increase of
$3,601,000 in cash and cash equivalents. The major use of cash during
the period included the purchase of securities totaling $9,998,000.
Major sources of funds were: $1,116,000 from operating activities,
maturing securities of $9,280,000, a decline in loans of $544,000, and
an increase ofbrokered deposits of $2,852,000.or "hot money."
1995 1994
---- ----
Liquid Assets (in thousands) $ 8,514 $ 7,630
Core Deposits (in thousands) $ 39,718 $ 39,169
% change from prior year +1.40% +1.81%
53
61
69
Interest Rate SensitivityINTEREST RATE SENSITIVITY:
- --------------------------
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap."gap. An asset or liability
is said to be interest rate sensitive within a specific time period, if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income while a positive gap would
tend to result in an increase in net interest income. During a period of falling
interest rates, a negative gap would tend to result in an increase in net
interest income while a positive gap would tend to adversely affect net interest
income.
The Bank uses several analyses to determine the optimal mix of maturities for
interest-earning assets relative to interest-bearing liabilities. The
predominate tool management utilizes is a Gap analysis. This Gap analysis is
prepared routinely to illustrate the interest rate sensitivity of assets
maturing and/or re-pricing within specified time frames versus liabilities due
within the same time period. The following table illustrates the asset (liability)and
liability funding gaps for selected time periods as of April 30, 1995.
INTEREST SENSITIVITY GAP ANALYSISDecember 31, 1995 (in
thousands).
Repricing Or Maturing Within
--------------------------------------------------------------------------------
Within 4-6 7-12 1-5 Over 5
31 1-3 3-6 6-12 1-3 3-5 5+ All
Month Months Months Months Years Years Years Others Total
-------- -------- -------- -------- ------- -------
(Dollars in thousands)----- ------ ------ ------ ----- ----- ----- ------ -----
Interest-earning assets:
Loans receivable,
net of unearned income
ASSETS
Cash $ 1,6584,258 $ 4,258
Federal funds
sold $ 2,600 2,600
Investments $ 390 $ 1,446 $ 6,448 $ 2,650 $ 1,488 12,422
Loans:
Real estate 1,266 $ 1 23 130 504 1,425 8,900 12,249
Installment 1 18 100 2,565 3,665 5,871 12,220
Commercial 226 92 127 87 77 28 58 695
LESS: AFLL (200) (200)
Fixed and other
assets 1,896 1,896
--------- --------- -------- --------- --------- --------- --------- --------- ---------
Total assets 4,092 94 558 1,763 9,594 7,768 16,317 5,954 46,140
LIABILITIES
DDA -
noninterest 8,863 8,863
NOW and
MMDA 13,539 13,539
Savings 10,648 10,648
CDs 1,018 845 2,238 1,748 1,225 210 108 7,392
Other
liabilities 784 784
--------- --------- -------- --------- --------- --------- --------- --------- ---------
1,018 25,032 2,238 1,748 1,225 210 108 9,647 41,226
Capital 4,914 4,914
--------- --------- -------- --------- --------- --------- --------- --------- ---------
1,018 25,032 2,238 1,748 1,225 210 108 14,561 46,140
--------- --------- -------- --------- --------- --------- --------- --------- ---------
Period GAP $ 3,074 $(24,938) $ (1,680) $ 15 $ 8,369 $ 7,558 $ 16,209 $ (8,607) $ 0
$ 3,517 $ 9,202 $17,604 $31,981
Investment securities held-to-maturity:
Taxable 251 0 1,252 12,989 0 14,492
Tax exempt 0 0 421 1,637 4,802 6,860
Investment securities available-for-sale:
Taxable 0 0 0 2,775 0 2,775
-------- -------- -------- -------- ------- -------
Total interest-earning assets 1,909 0 5,190 26,603 22,406 56,108
Interest-bearing liabilities:
Demand deposits (1) 11,418 0 0 0 0 11,418
Savings deposits (1) 7,799 0 0 0 0 7,799
Time deposits:
Less than $100,000 3,951 3,972 5,453 10,911 22 24,309
$100,000 or more 350 100 100 560 0 1,110
-------- -------- -------- -------- ------- -------
Total interest-bearing liabilities 23,518 4,072 5,553 11,471 22 44,636
-------- -------- -------- -------- ------- -------
Rate sensitivity gap $(21,609) $ (4,072) $ (363) $ 15,132 $22,384 $11,472========= ======== ======== ======== ======== ======= =======
Cumulative gap $(21,609) $(25,681) $(26,044) $(10,912) $11,472========= ========= ======== ========
======== ======= =======
Cumulative
gap as a percentage of
earning assets (38.51)GAP $ 3,074 $(21,864) $(23,544) $(23,529) $ (15,160) $ (7,602) $ 8,607 $ 0 $ 0
Period GAP (%) 6.66% (54.05)% (45.77)(3.64)% (46.42).03% 18.14% 16.38% 35.13% (18.65)% (19.45)0%
Cumulative
GAP (%) 6.66% (47.39)% 20.44%
======== ======== ======== ======= =======(51.03)% (51.00)% (32.86)% (16.48)% 18.65% 0% 0%
54
62
CAPITAL MANAGEMENT:
- --------------------------
(1) Savings and interest-bearing demand deposit accounts are subject to
immediate withdrawal and may be repriced on an immediate basis.
Therefore, these accounts are shown within the 3 months category.
However, based on past experience, management anticipates the majority
of these accounts to remain with the Company beyond one year.
62
70
Capital Management-------------------
Total shareholders' equity was $7,397,000$4,914,000 as of April 30, 1995,December 31, 1995. This
represents an increase over the prior year of $357,000 over totalDecember 31, 1994 of 7%. This was
accomplished while increasing the cash dividend from $1.75 during 1994 to $2.25
during 1995. The primary component of the change in shareholders' equity is the
net income for the year. Secondarily, the year of $7,040,0001995 benefitted from a
positive turnaround for the majority of securities classified as of April
30, 1994. The increase in total shareholders' equity wasavailable for
sale.
Restrictions exist due to 1995 net income
of $626,000 partially offset by dividends declared of $169,000. In addition, the
overall increase in equity was offset by the effects of SFAS No. 115, Accounting
for Certain Debt and Equity Securities adopted by the Company on April 30, 1994.
The effect of accounting for securities available-for-sale under SFAS No. 115
decreased equity $100,000, net of tax of $65,000, through an increase in the
unrealized loss on securities available-for-sale. Cash dividends per common
share outstanding increased 15% to $30 per share in 1995 from $26 per share in
1994.
Restrictions existregulatory guidelines imposed upon all financial
institutions regarding the Bank's ability of the subsidiary bank to transfer funds to the CompanyCorporation
in the form of cash dividends, loans or advances. (See Note 1 to the consolidated financial statements.) These restrictions have had no
majorsignificant impact on the Company'sCorporations dividend policy or operations and are not
anticipated to have any major the impact in the future.
The Company's bankCorporation's subsidiary Bank remains above the minimum capital requirements at April 30, 1995 forlevels
required by regulatory agencies to meet the definition of a well capitalized
Bank. The banking regulators may alter minimum capital requirements as a result
of revising their internal policies and their rating of the Corporation's
subsidiary bank. At April 30,As of December 31, 1995, management is not aware of any current
recommendations by banking regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have a material adverse effect on the
Company'sCorporations liquidity, capital managementresources or operations.
InflationUnder risk-based capital guidelines issued by the Federal Reserve Board, the
Corporation and its subsidiary bank are required to maintain a minimum
risk-based capital ratio of 8% and a minimum leverage ratio of 4% as of December
31, 1995. While risk-based capital guidelines consider on-balance-sheet and
off-balance-sheet risk, the minimum leverage ratio measures capital in relation
to total on-balance- sheet assets. The components of total risk-based capital
are tier 1 capital and tier 2 capital. The definition of capital, used in the
leverage ratio, is identical to tier 1 capital under risk-based capital
guidelines. Tier I capital is total shareholders' equity less intangible assets.
Tier 2 capital includes total allowance for loan losses up to a maximum of 1.25%
of risk-weighted assets. The net unrealized gain (loss) on securities available
for sale, net of tax, is not considered for meeting regulatory capital
requirements. The following table provides the minimum regulatory capital
requirements and the Corporation's actual capital ratios at December 31, 1995.
Minimum Regulatory Corporation's
Capital Requirements Actual Capital Ratio
Type of Capital Ratio at December 31, 1995 at December 31, 1995
--------------------- -------------------- --------------------
Ratio of tier 1 capital to
weighted-risk assets 4% 17.45%
Ratio of total capital to
weighted-risk assets 8% 18.16%
Leverage ratio 4% 10.66%
55
63
THE IMPACT OF INFLATION AND CHANGING PRICES:
- --------------------------------------------
For a financial institution, the effects of price changes and inflation can vary
substantially. Inflation affects the growth of total assets, but it is difficult
to assess its impact since neither the timing nor the magnitude of the changes
in the consumer price index (CPI) coincides with changes in interest rate.rates. The
price of one or more of the important components of the CPI may fluctuate
considerably and thereby influence the overall CPI without having a
corresponding affect on interest rates or upon the cost of those goods and
services normally purchased by the Corporation. In years of high inflation and
high interest rates, intermediate and long-term fixed interest rates tend to
increase, thereby adversely impacting the market values of investment
securities, mortgage loans and other long-term fixed rate loans,loans. In addition,
higher short-term interest rates caused by inflation tend to increase the cost
of funds. In other years, the reverse situation may occur.
6356
71
F&M BANCORP AND SUBSIDIARY64
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS - April 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . F-3
CONSOLIDATED STATEMENTS OF INCOME - Years ended
April 30,December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY - Years ended April 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . .F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years ended
April 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
F-1
7265
HASTINGS FINANCIAL CORPORATION
Hastings, Michigan
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
CONTENTS
REPORT OF INDEPENDENT AUDITORS............................................F-3
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS..........................................F-4
CONSOLIDATED STATEMENTS OF INCOME....................................F-5
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY...............................................F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS................................F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................F-9
F-2
66
REPORT OF INDEPENDENT AUDITORS
Board of Directors F&M Bancorp
Rochester, Indianaand Shareholders
Hastings Financial Corporation
Hastings, Michigan
We have audited the accompanying consolidated balance sheets of F&M BancorpHastings
Financial Corporation (the Company) and Subsidiary"Corporation") as of April 30,December 31, 1995 and 1994 and
the related consolidated statements of income, changes in shareholders' equity and cash
flows for the two years then ended. These consolidated financial statements are the
responsibility of the Company'sCorporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The consolidated
financial statements of the Corporation for the year ended December 31, 1993,
were audited by other auditors whose report dated January 14, 1994 expressed an
unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of F&M Bancorp and
SubsidiaryHastings Financial
Corporation as of April 30,December 31, 1995 and 1994, and the results of theirits operations
and theirits cash flows for the years then ended in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the CompanyCorporation
changed its method of accounting for income taxes effective May 1, 1993 and for
securities effective April 30, 1994.January 1, 1994 to
conform to new accounting guidance.
Crowe, Chizek and Company South Bend, Indiana
July 7, 1995, except for
Note 14, as to which the
date is September 11, 1995
F-2LLP
Grand Rapids, Michigan
January 5, 1996
F-3
73
F&M BANCORP AND SUBSIDIARY67
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
April 30,December 31, 1995 and 1994
1995 1994
---- ----
ASSETS
Cash and due from banks (Note 10)2) $ 1,813,7474,258,464 $ 2,677,5193,051,689
Federal funds sold - 1,900,000
--------------- --------------
Cash2,600,000
------------ ------------
Total cash and cash equivalents 1,813,747 4,577,5196,858,464 3,051,689
Securities available-for-saleavailable for sale (Note 2) 2,774,687 2,939,6873) 1,655,233 4,577,838
Securities held-to-maturityheld to maturity (fair
value of $20,740,000$10,659,280 in 1995 and
$22,826,000$12,587,671 in 1994) (Note 2) 21,352,059 23,150,580
Total loans3) 10,766,614 13,292,173
Loans (Note 3) 31,980,708 28,849,5654) 25,163,754 23,329,596
Allowance for loan losses (Note 4) (643,008) (602,038)
-------------- -------------
Net loans 31,337,700 28,247,5275) (200,031) (175,761)
------------ ------------
24,963,723 23,153,835
Premises and equipment, net (Note 5) 869,768 891,0756) 1,026,331 782,685
Accrued interest receivable 688,273 703,490357,578 420,298
Other assets 350,184 439,279
--------------- --------------(Note 9) 511,814 518,466
------------ ------------
$ 59,186,41846,139,757 $ 60,949,157
=============== ==============45,796,984
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand $ 6,787,5058,863,243 $ 6,350,484
Interest-bearing8,566,800
NOW and money market 13,539,396 13,395,508
Savings 10,647,428 11,083,248
Certificates of deposit (Note 6) 44,636,343 47,240,869
--------------- --------------
51,423,848 53,591,3537) 7,391,487 6,912,035
------------ ------------
40,441,554 39,957,591
Federal funds purchased 600,000
Accrued interest payable 261,448 258,714101,989 87,830
Other liabilities 103,971 59,022
--------------- --------------
51,789,267 53,909,089(Note 9) 682,341 580,371
------------ ------------
Total liabilities 41,225,884 41,225,792
Commitments off-balance sheet risk and contingencies (Notes 10 and 14)
Shareholders' equity
Common stock: nostock, $1 par value; 6,000value - authorized
400,000 shares; issued and outstanding 75,463
shares authorizedin 1995 and issued 600,000 600,000
Additional paid-in capital 1,200,000 1,200,00078,367 shares in 1994 75,463 78,367
Capital surplus 590,581 748,849
Retained earnings 5,863,967 5,407,006
Treasury stock, at cost, 367 shares (130,750) (130,750)(Note 11) 4,252,116 3,806,197
Net unrealized loss on securities
available-for-sale,available for sale, net of tax of $89,247 in$2,208 and
$32,054 for 1995 and $24,125 in 1994, (136,066) (36,188)
--------------- --------------
7,397,151 7,040,068
--------------- --------------respectively (4,287) (62,221)
------------ ------------
4,913,873 4,571,192
------------ ------------
$ 59,186,41846,139,757 $ 60,949,157
=============== ==============
See accompanying notes to consolidated financial statements.
F-3
74
F&M BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years ended April 30, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
(Unaudited)
INTEREST INCOME
Interest and fees on loans $ 2,933,141 $ 3,078,959 $ 3,469,739
Interest and dividends on securities
Taxable 1,035,418 1,120,040 1,242,375
Non-taxable 373,686 312,650 265,853
Interest on federal funds sold 39,766 145,946 104,710
-------------- ------------- -------------
4,382,011 4,657,595 5,082,677
INTEREST EXPENSE
Deposits (Note 6) 1,736,585 1,988,969 2,396,527
Other 6,176 5,310 31,596
-------------- ------------- -------------
1,742,761 1,994,279 2,428,123
-------------- ------------- -------------
NET INTEREST INCOME 2,639,250 2,663,316 2,654,554
Provision for loan losses (Note 4) 183,615 408,231 86,000
-------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,455,635 2,255,085 2,568,554
Other income
Service charges on deposits 192,875 198,290 181,190
Other service charges and fees 70,630 48,366 55,091
Rental income 17,107 16,941 17,702
Other income 15,968 33,522 58,849
-------------- ------------- -------------
296,580 297,119 312,832
Other expenses
Salaries and employee benefits (Note 8) 1,099,850 1,059,701 1,032,047
Occupancy expense 233,085 207,091 230,579
FDIC assessment 134,445 142,981 133,780
Electronic data processing services 20,554 55,249 29,919
Advertising and marketing 37,028 36,208 39,140
Supplies and postage expense 90,897 95,909 75,238
Loss on sale of assets 45,147 37,995 -
Other operating expenses 242,201 197,131 233,451
-------------- ------------- -------------
1,903,207 1,832,265 1,774,154
-------------- ------------- -------------
INCOME BEFORE INCOME TAX EXPENSE 849,008 719,939 1,107,232
Income tax expense (Note 9) 223,057 147,910 262,900
-------------- ------------- -------------
NET INCOME $ 625,951 $ 572,029 $ 844,332
============== ============= =============
Earnings per common share (Note 1) $ 111.12 $ 101.55 $ 149.89
============= ============= =============45,796,984
============ ============
See accompanying notes to consolidated financial statements.
F-4
75
F&M BANCORP AND SUBSIDIARY68
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended April 30, 1995, 1994 and 1993
Net
Unrealized
Loss
Additional on Securities Total
Common Paid-In Retained Treasury Available- Shareholders'
Stock Capital Earnings Stock For-Sale Equity
----- ------- -------- ----- -------- ------
Balances, May 1, 1992
(unaudited) $ 600,000 $ 1,200,000 $ 4,283,561 $ (130,750) $ - $ 5,952,811
Cash dividends ($26
per share) (unaudited) - - (146,458) - - (146,458)
Net income (unaudited) - - 844,332 - - 844,332
---------- ------------- ------------- ----------- ---------- ------------
Balances, April 30, 1993
(unaudited) 600,000 1,200,000 4,981,435 (130,750) - 6,650,685
Cash dividends ($26
per share) - - (146,458) - - (146,458)
Net income - - 572,029 - - 572,029
Effect of adopting State-
ment of Financial
Accounting Standards
No. 115, as of April 30,
1994 - - - - (36,188) (36,188)
---------- ------------- ------------- ----------- --------- -----------
Balances, April 30, 1994 600,000 1,200,000 5,407,006 (130,750) (36,188) 7,040,068
Cash dividends ($30
per share) - - (168,990) - - (168,990)
Net income - - 625,951 - - 625,951
Net change in unrea-
lized loss on securities
available-for-sale - - - - (99,878) (99,878)
---------- ------------- ------------- ----------- --------- -----------
Balances, April 30, 1995 $ 600,000 $ 1,200,000 $ 5,863,967 $ (130,750) $ (136,066) $ 7,397,151
========== ============= ============= ========== ========== ============
See accompanying notes to consolidated financial statements.
F-5
76
F&M BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 625,951 $ 572,029 $ 844,332
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 72,777 73,357 107,139
Provision for loan losses 183,615 408,231 86,000
Net amortization (accretion) on securities 106,661 72,642 95,712
Loss on sale of premises and equipment - 31,806 -
Loss on sale of foreclosed assets 45,147 6,189 -
Change in accrued interest receivable 15,217 135,419 98,344
Change in other assets (69,710) (23,182) (152,027)
Change in accrued interest payable 2,734 (45,753) (53,878)
Change in other liabilities 44,949 (132,269) 90,281
------------- ------------- --------------
Total adjustments 401,390 526,440 271,571
------------- -------------- --------------
Net cash from operating activities 1,027,341 1,098,469 1,115,903
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities
held-to-maturity 3,180,000 - -
Proceeds from maturities of securities - 13,150,619 9,280,000
Purchase of securities held-to-maturity (1,488,140) - -
Purchase of securities - (15,897,499) (9,998,165)
Loans made to customers and principal
collections, net (3,273,788) 2,524,431 543,904
Proceeds from sale of property and equipment - 1,100 -
Property and equipment expenditures (51,470) (170,274) (68,409)
Proceeds from sale of foreclosed real estate 178,780 59,811 22,200
------------- -------------- --------------
Net cash from investing activities (1,454,618) (331,812) (220,470)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits (2,167,505) (2,311,911) 2,852,420
Dividends paid (168,990) (146,458) (146,458)
------------- -------------- --------------
Net cash from financing activities (2,336,495) (2,458,369) 2,705,962
------------- -------------- --------------
Net change in cash and cash equivalents (2,763,772) (1,691,712) 3,601,395
Cash and cash equivalents at beginning of year 4,577,519 6,269,231 2,667,836
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,813,747 $ 4,577,519 $ 6,269,231
============= ============== ==============
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 1,740,027 $ 2,040,032 $ 2,482,001
Income taxes 209,000 258,980 225,610
See accompanying notes to consolidated financial statements.
F-6
77
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING: The accompanying consolidated financial statements include
the accounts of F&M Bancorp ("the Company") and its wholly- owned subsidiary,
Farmers & Merchants Bank of Rochester, Indiana ("the Bank"). All significant
intercompany balances and transactions have been eliminated.
SECURITIES: At April 30, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting For Certain Investments in
Debt and Equity Securities." Securities are now classified into
held-to-maturity, available-for-sale and trading categories. Held-to-maturity
securities are those which the Company has the positive intent and ability to
hold to maturity, and are reported at amortized cost. Available-for-sale
securities are those the Company may decide to sell if needed for liquidity,
asset-liability management or other reasons. Available-for-sale securities are
reported at fair value, with unrealized gains and losses included as a separate
component of shareholders' equity, net of tax. Trading securities are bought
principally for sale in the near term, and are reported at fair value with
unrealized gains and losses included in earnings.
Prior to April 30, 1994, securities were reported at amortized cost. The
adoption of SFAS No. 115 decreased equity, net of tax, by $36,188 at April 30,
1994.
Realized gains and losses resulting from the sale of securities are computed by
the specific identification method. Interest and dividend income, adjusted by
amortization of purchase premium or discount, is included in earnings.
INTEREST INCOME ON LOANS: Interest income on loans is calculated using the
simple interest method on daily balances of the principal amounts outstanding.
When serious doubt exists as to collectibility of a loan, the accrual of
interest is discontinued.
LOAN FEES AND COSTS: Loan fees and related origination costs are netted and
deferred under SFAS No. 91. The net deferral is included as part of loans and
recognized in interest income over the loan term on the level yield method.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses represents that
amount which management estimates is adequate to provide for losses on existing
loans, based on an evaluation of the loan portfolio and prior loan loss
experience. The evaluation, which is necessarily subjective, takes into
consideration such factors as changes in the nature and volume of the loan
portfolio, the level and seriousness of delinquencies and problem loans, and
current economic conditions which may affect the borrowers' ability to pay.
(Continued)
F-7
78
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The allowance is established through a provision for loan losses charged to
expense. The allowance is reduced by charging off loans deemed uncollectible
by management. After a loan is charged off, collection efforts continue, and
any recoveries of loans previously charged off are added to the allowance.
CONCENTRATIONS OF CREDIT RISK: The Company grants commercial, real estate and
consumer loans to customers located primarily in North Central Indiana.
Commercial loans make up approximately 21% of the loan portfolio and are
secured by both real estate and business assets. These loans are generally
expected to be repaid from cash flow from operations of businesses. Real
estate loans make up approximately 59% of the loan portfolio and are secured by
both commercial and residential real estate. Installment loans make up
approximately 20% of the loan portfolio and are primarily secured by consumer
assets.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful life of the asset. Maintenance
and repairs are expensed and major improvements are capitalized.
OTHER REAL ESTATE OWNED: Real estate properties acquired through, or in lieu
of, loan foreclosure are initially recorded at fair value at the date of
acquisition. Any reduction to fair value from the carrying value of the
related loan at the time of acquisition is accounted for as a loan loss and
charged against the allowance for loan losses. After acquisition, a valuation
allowance is recorded through a charge to income for the amount of estimated
selling costs. Valuations are periodically performed by management and
valuation allowances are adjusted through a charge to income for changes in
fair value or estimated selling costs. Other real estate owned amounted to
$-0- and $128,000 at April 30, 1995 and 1994, respectively.
INCOME TAXES: The Company and its subsidiary file consolidated federal and
state income tax returns. Effective May 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109. The
Company records income tax expense based on the amount of taxes due on its tax
return plus deferred taxes computed based on the expected future tax
consequences of temporary differences between the carrying amounts and tax
bases of assets and liabilities, using enacted tax rates. Previously, the
Company computed deferred taxes for the tax effects of timing differences
between financial reporting and tax return income. The effect of the adoption
of SFAS No. 109 as of May 1, 1993 was not material.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are defined to include
the Company's cash on hand, its demand deposits in other institutions and
federal funds sold. The Company reports net cash flows for customer loan and
deposit transactions.
(Continued)
F-8
79
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
DIVIDEND RESTRICTION: The Company's subsidiary bank is subject to banking
regulations which require the maintenance of certain capital levels and which
may limit the amount of dividends which may be paid.
EARNINGS PER COMMON SHARE: Earnings and dividends per common share have been
computed based on the weighted average number of shares outstanding during the
periods presented. The number of shares used in the computation of earnings
per common share was 5,633 for all periods presented.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities as presented on the
consolidated balance sheets are as follows:
Securities available-for-sale at April 30, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government corporations
and agencies $ 3,000,000 $ - $ (225,313) $ 2,774,687
============== ============== ============= ==============
Securities held-to-maturity at April 30, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government corporations
and agencies $ 13,988,129 $ - $ (590,129) $ 13,398,000
Obligations of states and political
subdivisions 6,860,651 104,534 (132,185) 6,833,000
Corporate notes 503,279 5,721 - 509,000
-------------- -------------- -------------- --------------
$ 21,352,059 $ 110,255 $ (722,314) $ 20,740,000
============== ============== ============= ==============
Securities available-for-sale at April 30, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government corporations
and agencies $ 3,000,000 $ - $ (60,313) $ 2,939,687
============== ============== ============= ==============
(Continued)
F-9
80
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 2 - SECURITIES (Continued)
Securities held-to-maturity at April 30, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities $ 500,048 $ 952 $ - $ 501,000
U.S. Government corporations
and agencies 15,068,663 39,142 (305,805) 14,802,000
Obligations of states and
political subdivisions 6,819,063 98,061 (157,124) 6,760,000
Corporate notes 762,806 194 - 763,000
-------------- -------------- ------------- --------------
$ 23,150,580 $ 138,349 $ (462,929) $ 22,826,000
============== ============== ============= ==============
The amortized cost and fair value of debt securities at April 30, 1995,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Available-for-Sale Held-to-Maturity
. . . . Securities . . . . . . . . Securities . . . .
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due in one year or less $ - $ - $ 1,923,838 $ 1,912,000
Due after one year through
five years 3,000,000 2,774,687 14,625,943 14,051,000
Due after five years through
ten years - - 2,549,222 2,554,000
Due after ten years - - 2,253,056 2,223,000
-------------- -------------- -------------- --------------
$ 3,000,000 $ 2,774,687 $ 21,352,059 $ 20,740,000
============== ============== ============== ==============
There were no sales of securities during the period May 1, 1992 through April
30, 1995.
As of April 30, 1995 and 1994, investments in debt securities with an amortized
cost of approximately $489,000 and $519,000, respectively, were pledged to
secure public deposits.
(Continued)
F-10
81
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 3 - LOANS
Loans as presented on the consolidated balance sheets are comprised of the
following classifications:
1995 1994
---- ----
Real estate loans $ 18,953,374 $ 16,426,868
Commercial loans 6,809,529 6,711,319
Installment loans 6,217,805 5,711,378
-------------- --------------
$ 31,980,708 $ 28,849,565
============== ==============
At April 30, 1995 and 1994, loans on nonaccrual status totaled approximately
$646,000 and $527,000, respectively. Interest income not recognized on these
loans totaled approximately $59,000, $57,000 and $35,000 during 1995, 1994 and
1993, respectively.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses for the years ended
April 30, 1995, 1994 and 1993 is as follows:
1995 1994 1993
---- ---- ----
Balance, beginning of year $ 602,038 $ 488,773 $ 491,052
Provision for loan losses 183,615 408,231 86,000
Loans charged-off (209,080) (358,274) (156,784)
Recoveries on loans previously charged-off 66,435 63,308 68,505
-------------- -------------- --------------
Balance, end of year $ 643,008 $ 602,038 $ 488,773
============== ============== ==============
(Continued)
F-11
82
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 5 - PREMISES AND EQUIPMENT, NET
The following is a summary of premises and equipment by major category as of
April 30:
1995 1994
---- ----
Land $ 76,200 $ 76,200
Buildings and improvements 1,171,650 1,142,745
Furniture and equipment 591,659 569,094
-------------- --------------
1,839,509 1,788,039
Accumulated depreciation (969,741) (896,964)
-------------- --------------
$ 869,768 $ 891,075
============== ==============
NOTE 6 - INTEREST-BEARING DEPOSITS
Total interest-bearing deposits as presented on the consolidated balance sheets
are comprised of the following classifications:
1995 1994
---- ----
Interest-bearing demand $ 11,417,850 $ 11,417,547
Savings 7,798,904 8,279,159
Time
In denominations under $100,000 24,309,248 26,917,309
In denominations of $100,000 or more 1,110,341 626,854
-------------- --------------
$ 44,636,343 $ 47,240,869
============== ==============
Interest expense on deposits for the years ended April 30, is summarized as
follows:
1995 1994 1993
---- ---- ----
Interest-bearing demand $ 290,235 $ 312,926 $ 342,360
Savings 227,050 207,059 217,867
Time 1,219,300 1,468,984 1,836,300
-------------- -------------- --------------
$ 1,736,585 $ 1,988,969 $ 2,396,527
============== ============== ==============
(Continued)
F-12
83
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 7 - RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Company, including associates
of such persons, are loan customers of the Bank. As of April 30, 1995 and
1994, there were no such loans aggregating $60,000 or more with any director,
executive officer or their related interests.
NOTE 8 - EMPLOYEE BENEFITS
The Bank sponsors a contributory target benefit pension plan covering
substantially all employees who meet certain age and service requirements. The
Bank's contribution and expense for the plan is an amount determined annually
by a formula (as defined in the plan). The plan provides for 100% vested
interest after completion of seven years of service. In general, distributions
from the plan are made only at retirement, death, disability, termination of
employment, or termination of the plan. Pension plan expense was $101,542,
$70,255 and $77,362 for the years ended April 30, 1995, 1994 and 1993,
respectively.
NOTE 9 - INCOME TAXES
Income tax expense is summarized as follows:
1995 1994 1993
---- ---- ----
Federal
Current $ 168,913 $ 114,932 $ 183,933
Deferred (20,127) (20,479) (16,654)
----------- ----------- ----------
148,786 94,453 167,279
State
Current 79,794 62,125 103,705
Deferred (5,523) (8,668) (8,084)
----------- ----------- ----------
74,271 53,457 95,621
------------ ------------ -----------
$ 223,057 $ 147,910 $ 262,900
============ ============ ===========
The components of the net deferred tax asset recorded on the consolidated
balance sheets as of April 30, 1995 and 1994 are as follows. No valuation
allowance was required.
(Continued)
F-13
84
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 9 - INCOME TAXES (Continued)
1995 1994
---- ----
Deferred tax assets
Bad debts $ 208,866 $ 191,538
Net unrealized losses on securities
available-for-sale 89,247 24,125
Other 10,200 -
----------- -----------
Total deferred tax assets 308,313 215,663
Deferred tax liabilities
Depreciation (54,805) (54,805)
Franchise tax (15,550) (13,672)
---------- ----------
Total deferred tax liabilities (70,355) (68,477)
---------- ----------
Net deferred tax asset $ 237,958 $ 147,186
=========== ===========
The difference between income tax expense shown on the consolidated statements
of income and amounts computed by applying the statutory federal income tax
rate to income before income tax expense are as follows:
1995 1994 1993
---- ---- ----
Income taxes computed at statutory federal
rate (34% in 1995, 1994 and 1993) $ 288,663 $ 244,779 $ 376,459
Increase (decrease) in taxes resulting from
Tax-exempt income (132,173) (123,614) (111,918)
Non-deductible interest expense 14,016 12,500 10,750
State tax, net of federal income tax effect 49,019 35,282 63,110
Other 3,532 (21,037) (75,501)
----------- ---------- ----------
$ 223,057 $ 147,910 $ 262,900
============ =========== ===========
NOTE 10 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
The Company is a party to financial instruments with off-balance-sheet risk in
the ordinary course of business to meet financing needs of its customers.
These financial instruments include commitments to make loans, unused lines of
credit and standby letters of credit. The Company's exposure to credit loss in
the event of nonperformance by the other party to the financial instrument for
commitments to make loans, unused lines of credit and standby letters of credit
is represented by the contractual amount of those instruments. The Company
follows the same credit policy to make such commitments as is followed for
those loans recorded in the financial statements.
(Continued)
F-14
85
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 10 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
(Continued)
As of April 30, 1995 and 1994, commitments to make loans and unused lines of
credit amounted to approximately $1,908,000 and $3,115,000, respectively, and
commitments under outstanding standby letters of credit amounted to
approximately $49,000 for both periods. Since many commitments to make loans
and standby letters of credit expire without being used, the amount does not
necessarily represent future cash commitments. No losses are anticipated as a
result of these transactions. Collateral obtained upon exercise of the
commitment is determined using management's credit evaluation of the borrower
and may include real estate, vehicles, business assets, deposits and other
items.
The Company was required to have approximately $414,000 and $372,000 of cash on
hand or on deposit with the Federal Reserve Bank to meet regulatory reserve
requirements at April 30, 1995 and 1994, respectively. These balances do not
earn interest.
The Company is a party to various legal actions arising in the ordinary course
of business. In the opinion of management, after consultation with legal
counsel, the ultimate disposition of these matters is not expected to have a
material adverse effect on the financial position of the Company.
NOTE 11 - MEMORANDUM OF UNDERSTANDING (MOU) AND RELEASE FROM MOU
On June 16, 1992, the Bank entered into a Memorandum of Understanding with the
Indiana Department of Financial Institutions (IDFI) and the Federal Deposit
Insurance Corporation (FDIC).
The MOU set forth provisions including drafting or revising certain bank
policies, enhancing credit practices and loan documentation, adopting a
methodology for the review of the adequacy of the allowance for loan losses and
addressing certain other matters. Management believes it has substantially
complied with these matters. As of June 17, 1994, the FDIC released the Bank
from the requirements of the MOU and the FDIC notified the IDFI of that
release. As of November 3, 1994, the IDFI also released the Bank from the
requirements of the MOU.
(Continued)
F-15
86
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 12 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are condensed financial statements for the parent company only,
F&M Bancorp.
CONDENSED BALANCE SHEETS
April 30, 1995 and 1994
1995 1994
---- ----
ASSETS
Cash and cash equivalents $ 45,363 $ 33,598
Investment in subsidiary bank 7,351,788 7,006,470
-------------- --------------
$ 7,397,151 $ 7,040,068
============== ==============
SHAREHOLDERS' EQUITY
Common stock $ 600,000 $ 600,000
Additional paid-in capital 1,200,000 1,200,000
Retained earnings 5,863,967 5,407,006
Treasury stock (130,750) (130,750)
Net unrealized loss on securities available-for-sale,
net of tax (136,066) (36,188)
------------- -------------
$ 7,397,151 $ 7,040,068
============== ==============
(Continued)
F-16
87
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 12 - PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENTS OF INCOME
Years ended April 30,December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Operating income
Interest income
$ 906 $ 644 $ 402
Dividends from subsidiaryLoans, including fees $2,137,046 $1,833,047 $1,798,363
Securities
U.S. Treasury and federal agencies 588,870 751,496 764,527
State and political subdivisions 154,528 192,068 149,243
Other 27,803 59,977 129,302
Federal funds sold 97,000 69,652 75,742
---------- ---------- ----------
3,005,247 2,906,240 2,917,177
Interest expense (Note 7) 1,075,146 1,009,460 1,056,435
---------- ---------- ----------
NET INTEREST INCOME 1,930,101 1,896,780 1,860,742
Provision for loan losses (Note 5) 34,030 2,775
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,896,071 1,894,005 1,860,742
Other income (loss)
Service charges 332,084 308,329 278,992
Security sales or calls,
net gain (loss) (Note 3) 1,302 (9,199) (16,992)
Gain on life insurance policy 98,924
Other 37,064 17,810 17,867
---------- ---------- ----------
469,374 316,940 279,867
Other expenses
Salaries and wages 653,313 669,093 652,165
Pension and other employee
benefits (Note 9) 229,727 275,935 147,495
Occupancy expense of bank 180,000 156,000 156,000
----------- ----------- ------------
180,906 156,644 156,402
INCOME BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARY BANK 180,906 156,644 156,402
Equity in undistributed income
of subsidiary bank 445,196 415,385 687,930
----------- ----------- ------------premises 123,556 118,495 97,159
FDIC assessment 45,181 86,794 91,652
Equipment expenses 133,539 155,778 191,973
Supplies and postage expense 85,791 77,378 77,063
Professional services 80,604 55,797 47,907
Other expenses 209,657 230,550 203,486
---------- ---------- ----------
1,561,368 1,669,820 1,508,900
---------- ---------- ----------
INCOME BEFORE INCOME TAX 626,102 572,029 844,332
Provision forTAXES 804,077 541,125 631,709
Federal income tax 151 - -
----------- ----------- ------------expense (Note 8) 188,366 138,370 219,350
---------- ---------- ----------
NET INCOME $ 625,951615,711 $ 572,029402,755 $ 844,332
=========== =========== ============412,359
========== ========== ==========
Earnings per common share (Note 1) $8.10 $5.08 $5.23
===== ===== =====
(Continued)
F-17See accompanying notes to consolidated financial statements.
F-5
88
F&M BANCORP AND SUBSIDIARY
NOTES TO69
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS April 30,OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
Information as of and Prior
Net Unrealized
Gain (Loss)
on Securities Total
Common Capital Retained Available Shareholders'
Stock Surplus Earnings for Sale Equity
----- ------- -------- -------- ------
BALANCE,
JANUARY 1, 1993 $ 78,367 $ 748,849 $3,257,531 $4,084,747
Net income 412,359 412,359
Cash dividends at
$1.65 per share (129,306) (129,306)
---------- ---------- ----------- -----------
BALANCE,
DECEMBER 31, 1993 78,367 748,849 3,540,584 4,367,800
Unrealized gain on
securities available
for sale at January 1,
1994, net of tax of
$27,442 $ 53,271 53,271
Net income 402,755 402,755
Cash dividends at
$1.75 per share (137,142) (137,142)
Change in net
unrealized gain
(loss) on securities
available for sale,
net of tax of $59,496 (115,492) (115,492)
---------- ---------- ---------- ----------- -----------
BALANCE,
DECEMBER 31, 1994 78,367 748,849 3,806,197 (62,221) 4,571,192
Net income 615,711 615,711
Repurchase and
retirement of
common stock (2,904) (158,268) (161,172)
Cash dividends at
$2.25 per share (169,792) (169,792)
Change in net
unrealized gain
(loss) on securities
available for sale,
net of tax of $29,846 57,934 57,934
---------- ---------- ---------- ---------- ----------
BALANCE,
DECEMBER 31, 1995 $ 75,463 $ 590,581 $4,252,116 $ (4,287) $4,913,873
========== ========== ========== =========== ==========
See accompanying notes to April 30, 1993 is Unaudited
NOTE 12 - PARENT COMPANY ONLYconsolidated financial statements.
F-6
70
HASTINGS FINANCIAL STATEMENTS (Continued)
CONDENSEDCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30,December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 625,951615,711 $ 572,029402,755 $ 844,332412,359
Adjustments to reconcile net income to
net cash from operating activities
EquityDepreciation 85,023 113,803 117,570
Net (gains) losses on security
sales and calls (1,302) 9,199 16,992
Provision for loan losses 34,030 2,775
Net amortization of premiums and
discounts on investment securities 9,405 4,651
Net change in undistributed income
of subsidiary bank (445,196) (415,385) (687,930)
---------- ----------assets and liabilities
Accrued interest receivable 62,720 (13,230) 57,175
Other assets (23,194) (915) (33,021)
Accrued interest payable 14,159 (6,153) (17,705)
Other liabilities 69,320 (141,180) 5,211
----------- ----------- -----------
Net cash from operating activities 180,755 156,644 156,402865,872 371,705 558,581
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities
available for sale (500,000) (5,000,000)
Proceeds from sales of securities
available for sale 1,500,000 1,500,000
Proceeds from maturities of securities
available for sale 2,000,000 3,500,000
Purchases of securities
held to maturity (500,625) (3,650,967)
Proceeds from maturities and calls of
securities held to maturity 2,873,698 3,350,000
Proceeds from principal paydowns
on mortgage-backed securities 154,768 819,335 1,215,028
Proceeds from sales and maturities
of investment securities 7,375,774
Purchases of investment securities (10,263,269)
Net change in loans (1,843,918) (4,455,385) 966,346
Purchases of premises
and equipment, net (328,669) (10,863) (86,868)
Purchase of other assets (25,000)
----------- ----------- -----------
Net cash from investing activities 3,355,254 (3,947,880) (817,989)
See accompanying notes to consolidated financial statements.
F-7
71
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 483,963 313,313 (2,136,132)
Net change in federal funds purchased (600,000) 600,000
Dividends paid (168,990) (146,458) (146,458)
---------- ----------(137,142) (129,306)
Repurchase and retirement
of common stock (161,172)
----------- Cash flows----------- -----------
Net cash from financing activities (168,990) (146,458) (146,458)(414,351) 913,313 (2,265,438)
----------- ----------- -----------
Net change in cash and cash equivalents 11,765 10,186 9,9443,806,775 (2,662,862) (2,524,846)
Cash and cash equivalents at
beginning of year 33,598 23,412 13,4683,051,689 5,714,551 8,239,397
----------- ----------- -----------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 45,3636,858,464 $ 33,5983,051,689 $ 23,4125,714,551
=========== =========== =======================
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest $ 1,060,987 $ 1,015,613 $ 1,074,140
Income taxes 157,000 193,056 226,800
Supplemental disclosure of noncash investing activities
Upon the adoption of SFAS No. 115 at January 1, 1994, the Corporation
transferred $4,666,441 from investment securities to securities available
for sale and transferred $13,830,063 from investment securities to
securities held to maturity.
See accompanying notes to consolidated financial statements.
F-8
72
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 131 - IMPACTNATURE OF NEWOPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING STANDARDSPOLICIES
NATURE OF OPERATIONS AND INDUSTRY SEGMENT INFORMATION: The Corporation is
organized as a bank holding company, and its wholly-owned subsidiary, National
Bank of Hastings (the Bank), is a national banking corporation. The accompanying
consolidated financial statements include the accounts of the Corporation and
the Bank. All significant intercompany transactions and balances have been
eliminated in consolidation. The Corporation grants credit and accepts deposits
from its customers in the normal course of business, substantially all of which
is in the area of South Central Michigan. The Corporation operates primarily in
the banking industry which accounts for more than 90% of its revenues, operating
income and assets.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS: The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
CERTAIN SIGNIFICANT ESTIMATES: The allowance for loan losses and fair values of
certain financial instruments involve certain significant estimates made by
management. These estimates are reviewed by management routinely and it is
reasonably possible that circumstances that exist at December 31, 1995 will
change in the near-term and that the effect would be material to the
consolidated financial statements.
SECURITIES AVAILABLE FOR SALE: Investment securities available for sale consist
of those securities not classified as trading or held to maturity. Such
securities might be sold prior to maturity due to changes in interest rates,
prepayment risks, yield and availability of alternative investments, liquidity
needs or other factors. Effective January 1, 1994, the Corporation adopted
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities (SFAS No. 115). As required by SFAS
No. 115, securities classified as available for sale are reported at their fair
values and the related unrealized holding gain or loss is reported, net of
related income tax effects, as a separate component of shareholders' equity,
until realized. Adoption of SFAS No. 115 increased shareholders' equity at
January 1, 1994 by $53,271.
Premiums and discounts on securities available for sale are recognized in
interest income using the level yield method over the estimated life of the
security. Gains and losses on the sale of securities available for sale are
determined using the specific identification method based upon amortized cost.
SECURITIES HELD TO MATURITY: Investment securities for which management has the
positive intent and the Corporation has the ability to hold to maturity are
reported at cost, adjusted for premiums and discounts that are recognized in
interest income using the level yield method over the period to maturity.
(Continued)
F-9
73
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
LOANS: Loans are stated at unpaid principal balances, less the allowance for
loan losses and net deferred loan origination fees.
LOAN FEES AND COSTS: Loan fees, net of certain direct loan origination costs,
are deferred and amortized into interest income over the term of the loans using
the level-yield method.
ALLOWANCE FOR LOAN LOSSES: Because some loans may not be repaid in full, an
allowance for loan losses is recorded. Increases to the allowance are recorded
by a provision for possible loan losses charged to expense. Estimating the risk
of loss and the amount of loss on any loan is necessarily subjective.
Accordingly, the allowance is maintained by management at a level considered
adequate to cover possible losses that are currently anticipated based on past
loss experience, general economic conditions, information about specific
borrower situations including their financial position and collateral values,
and other factors and estimates which are subject to change over time. While
management may periodically allocate portions of the allowance for specific
problem loan situations, the whole allowance is available for any loan
charge-offs that occur. A loan is charged-off against the allowance by
management as a loss when deemed uncollectible, although collection efforts may
continue and future recoveries may occur.
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
Accounting by Creditors for Impairment of a Loan.Loan (SFAS No. 114). SFAS No. 114,
effective for the Bank beginning January 1, 1995, requires that impaired loans,
as defined, be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or the fair value of collateral if the
loan is collateral dependent. SFAS No. 114, as amended by SFAS No. 118, requires that allowances for loan losses on impaired loans be
determined using the present value of estimated future cash flows of the loan,
discounted at the loan's effective interest rate. A loan is considered to be
impaired when it is probable that all principal and interest amounts will not
be collected according to the loan contract. SFAS No. 114 and No. 118 are
effective for fiscal years beginning after December 15, 1994. The Company does
not anticipate the effect of adopting the new accounting pronouncement to be
material to the Company's consolidated financial statements.
(Continued)
F-18
89
F&M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995, 1994 and 1993,
Information as of and Prior to April 30, 1993 is Unaudited
NOTE 14 - PROPOSED ACQUISITION OF THE COMPANY
On September 11, 1995, the Company entered into a Plan and Agreement of Merger
(the "Agreement") to be acquired by First Financial Bancorp (FFB), a holding
company, headquartered in Hamilton, Ohio with total assets of $1,922,643,000
and total equity of $194,673,000 at December 31, 1994. FFB will pay
$12,500,000 in common stock of FFB for all the outstanding shares of the
Company. It is anticipated that the transaction will be a tax free exchange of
stock and will be recorded using the pooling-of-interests method of accounting.
The exchange ratio will be subject to a final pricing period (as defined) prior
to the consummation date of the merger. The Agreement allows for termination
and abandonment under various conditions. One such provision allows FFB to
terminate the Agreement if the average price (computed according to the terms
defined in the Agreement) of FFB common stock is less than $28.48 per share.
Similarly, the Company has the option to terminate the Agreement if the average
price of FFB common stock is greater than $38.53 per share.
Upon consummation of the transaction, the Company will be merged into FFB and
the Company's subsidiary bank, Farmers & Merchants Bank, will be merged into
Indiana Lawrence Bank, a subsidiary of FFB.
The transaction is subject to the approval of the Company's shareholders and
various regulatory agencies.
F-19
90
F & M BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1995 AND 1994
The following discussion provides information about the Company's
financial condition and results of operations which may not otherwise be
apparent from the consolidated financial statements included elsewhere herein.
This discussion should be read in conjunction with the consolidated financial
statements and the related footnotes.
Earnings Summary
Consolidated net income for F & M Bancorp (the "Company") for the six
month period ended October 31, 1995 totaled $326,000 ($57.95 per share), a
decrease of $31,000 or 9% over the $357,000 ($63.33 per share) earned during the
same period in 1994. No cash dividends were declared for the six month periods
ended October 31, 1995 and 1994. Historically, the Company declares an annual
dividend in the first quarter of the calendar year.
Results Of Operations - Six Months Ended October 31, 1995 Versus 1994
Net interest income for the six month period ended October 31, 1995 was
$1,337,000, an increase of $11,000 or 0.8% from the same period in 1994. This
modest increase in net interest income resulted from an increase in interest
income of $82,000 offset by an increase in interest expense of $71,000.
Federal funds sold increased $4,500,000 during the six month period,
from $0 at April 30, 1995 to $4,500,000 at October 31, 1995. This increase was
funded by a decrease in securities held-to-maturity and an increase in deposits.
Securities (available-for-sale and held-to-maturity) totaled
$23,224,000 at October 31, 1995 which represents a decrease of $903,000 or 3.7%
from total securities of $24,127,000 at April 30, 1995. The decrease in
securities is the result of proceeds from maturities being shifted into short
term federal funds sold to provide increased liquidity. The decrease in
securities was tempered by an increase in fair value for securities
available-for-sale totaling $157,000 over the six month period. There were no
purchases of securities for the six month period ended October 31, 1995.
As discussed in Note 2 of the October 31, 1995 Consolidated Financial
Statements, management and the Board of Directors are presently evaluating the
Special Report issuedadopted by the Financial Accounting Standards Board on November
15, 1995 providing guidance on the implementation of Statement of Financial
Accounting Standards No. 115. See Note 2 for further discussion regarding the
Special Report and the possible impact on future financial statements.
Total loans remained fairly constant over the six month period ended
October 31, 1995.
64
91
Total deposits at October 31, 1995 amounted to $56,084,000, an increase
of $4,660,000 or 9.1% over total deposits of $51,424,000 at April 30, 1995. This
increase predominately occurred in October, 1995. Approximately $3,000,000 of
the increase related to municipal funds received from a bond issue being
deposited at the Bank subsidiary. At November 30, 1995, approximately $1,300,000
of these funds remain on deposit. Management has invested these deposits in
overnight federal funds to ensure adequate liquidity.
The provision for loan losses was $82,000 for the six months ended
October 31, 1995 as compared to $55,000 for the similar period in 1994, or an
increase of $27,000. Gross charge-offs for the six month period ended October
31, 1995 were $63,000 as compared to the six month period ended October 31, 1994
amount of $129,000, or a decrease of $66,000. At October 31, 1995, the allowance
for loan losses was $688,000 or 2.15% of total loans, compared to $643,000 or
2.01% of total loans at April 30, 1995. Management believes the allowance for
loan losses balance at October 31, 1995 is adequate to absorb losses on loans
that may occur. Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan" was adopted at May 1, 1995.
The effect of adopting this standard was not material to the consolidated
financial statements.
Other income remained consistent for the six months ended October 31,
1995 as compared to the same period in 1994.
Total non-interest expense decreased $14,000 or 1.5% to $933,000 for
the six months ended October 31, 1995 as compared to the same period in 1994.
The more significant changes were a decrease in salaries and employee benefits
of $61,000 or 11% and a decrease in FDIC assessment of $63,000 or 88%, offset by
merger related expenses of $121,000. The decrease in salaries and employee
benefits is principally related to a reduction in the number of officer
positions. The decrease in FDIC assessment is the result of the FDIC
substantially decreasing the deposit insurance rate for insured funds and
providing a refund of certain prior funds paid during the six month period ended
October 31, 1995. Management anticipates that the near-term FDIC assessment
levels will continue at low levels. As a result of the proposed acquisition of
the Company (see Note 14 in the April 30, 1995 Consolidated Financial Statements
for further information), certain professional fees have been incurred during
the six months ended October 31, 1995. These fees include attorney, accounting
and various consulting fees associated with the proposed merger.
Income tax expense for the six month period ended October 31, 1995 was
$156,000, an increase of $31,000 or 25% over the same period in 1994. This
increase is primarily due to the nondeductible nature of certain merger related
expenses.
Liquidity
The Company manages its primary liquidity position to provide funding
at the lowest possible cost for anticipated loan demand and/or deposit run-off
that occurs in the regular course of business. Such sources of liquidity are:
federal funds, purchased lines with correspondent banks and maturities from the
securities held-to- maturity portfolio. At October 31, 1995, scheduled
maturities over the next six months total $1,673,000.
65
92
The Company manages a secondary liquidity position to provide funding
in the event of unanticipated loan demand and/or deposit run-off. Management
maintains approximately 14% or $2,933,000 of its securities portfolio as
available-for-sale as of October 31, 1995. This designation provides additional
liquidity to fund abnormal loan demand, or to manage unanticipated run-off of
deposits. These securities are readily marketable as they are U.S. federal
agency securities directly or indirectly guaranteed by the Federal government.
The following is a brief description of the sources and uses of funds
for the period indicated:
During the six month period ended October 31, 1995, there was a net
increase of $6,171,000 in cash and cash equivalents. Major sources of
funds included a $4,660,000 increase in deposits (see previous
discussion regarding the impact of municipal funds on the growth of
deposits), $1,050,000 in maturities of securities held-to-maturity and
$467,000 from operating activities. There were no significant uses of
funds.
Capital Management
Total shareholders' equity was $7,819,000 as of October 31, 1995, an
increase of $422,000 over total shareholders' equity of $7,397,000 as of April
30, 1995. The increase in total shareholders' equity was primarily due to net
income for the six months ended October 31, 1995 of $326,000. In addition,
equity was positively impacted by the effects of SFAS No. 115. The effect of
accounting for securities available-for-sale under SFAS No. 115 increased equity
$95,000, net of tax of $62,000, through an increase in the fair value of
securities available-for-sale.
Restrictions exist regarding the ability of the subsidiary bank to
transfer funds to the Company in the form of cash dividends, loans or advances
(see Note 1 in the April 30, 1995 Consolidated Financial Statements). These
restrictions have had no major impact on the Company's dividend policy or
operations and are not anticipated to have any major impact in the future.
The Company's bank subsidiary remains above the minimum capital
requirements at October 31, 1995 for a well capitalized bank. At October 31,
1995, management is not aware of any current recommendations by banking
regulatory authorities which, if they were to be implemented, would have, or are
reasonably likely to have, a material adverse effect on the Company's liquidity,
capital management or operations.
66
93
Inflation
For a financial institution, the effects of price changes and inflation
can vary substantially. Inflation affects the growth of total assets, but it is
difficult to assess its impact since neither the timing nor the magnitude of the
changes in the consumer price index (CPI) coincides with changes in interest
rate. The price of one or more of the important components of the CPI may
fluctuate considerably and thereby influence the overall CPI without having a
corresponding affect on interest rates or upon the cost of those goods and
services normally purchased by the Corporation. In years of high inflation and
high interest rates, intermediate and long-term fixed interest rates tend to
increase, thereby adversely impacting the market values of investment
securities, mortgage loans and other long-term fixed rate loans. In addition,
higher short-term interest rates caused by inflation tend to increase the cost
of funds. In other years, the reverse situation may occur.
67
94
F & M BANCORP AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - October 31, 1995............................ 69
CONSOLIDATED STATEMENTS OF INCOME - Six months ended
October 31, 1995 and 1994.............................................. 70
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY - Six months ended October 31, 1995 and 1994.................... 71
CONSOLIDATED STATEMENTS OF CASH FLOWS - Six months ended
October 31, 1995 and 1994.............................................. 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................... 73
68
95
F & M BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
October 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 3,485,038
Federal funds sold 4,500,000
------------
Cash and cash equivalents 7,985,038
Securities available-for-sale (Note 2) 2,932,812
Securities held-to-maturity
(fair value of $20,283,002) (Note 2) 20,291,561
Total loans 31,923,036
Allowance for loan losses (Note 3) (687,803)
------------
Net loans 31,235,233
Premises and equipment, net 843,344
Accrued interest receivable 880,781
Other assets 289,918
------------
$ 64,458,687
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 8,062,296
Interest-bearing 48,021,617
------------
56,083,913
Accrued interest payable 277,436
Other liabilities 278,288
------------
56,639,637
Commitments, off-balance sheet risk and contingencies
Shareholders' equity
Common stock: no par value; 6,000 shares
authorized and issued 600,000
Additional paid-in capital 1,200,000
Retained earnings 6,190,375
Treasury stock, at cost, 367 shares (130,750)
Net unrealized loss on securities available-for-sale,
net of tax of $26,613 (40,575)
------------
7,819,050
------------
$ 64,458,687
============
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
69
96
F & M BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Six months ended October 31, 1995 and 1994
(Unaudited)
- --------------------------------------------------------------------------------
1995 1994
---- ----
INTEREST INCOME
Interest and fees on loans $1,594,684 $1,472,056
Interest and dividends on securities
Taxable 481,245 525,829
Non-taxable 183,830 187,251
Interest on federal funds sold 27,196 19,617
---------- ----------
2,286,955 2,204,753
INTEREST EXPENSE
Deposits 947,889 874,068
Other 1,784 4,372
---------- ----------
949,673 878,440
---------- ----------
NET INTEREST INCOME 1,337,282 1,326,313
Provision for loan losses (Note 3) 82,000 54,615
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,255,282 1,271,698
Other income
Service charges on deposits 99,846 99,528
Other service charges and fees 36,059 38,757
Rental income 7,955 8,475
Other income 16,094 10,003
---------- ----------
159,954 156,763
Other expenses
Salaries and employee benefits 488,158 549,588
Occupancy expense 124,772 110,551
FDIC assessment 8,473 71,389
Electronic data processing services 19,195 9,665
Advertising and marketing 18,162 15,806
Supplies and postage expense 37,718 42,229
Loss on sale of assets 10,622 36,000
Merger expense 120,664 --
Other operating expenses 105,182 111,295
---------- ----------
932,946 946,523
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 482,290 481,938
Income tax expense 155,882 125,213
---------- ----------
NET INCOME $ 326,408 $ 356,725
========== ==========
Earnings per common share $ 57.95 $ 63.33
========== ==========
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
70
97
F & M BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended October 31, 1995 and 1994
(Unaudited)
- --------------------------------------------------------------------------------
Net
Unrealized
Loss
Additional on Securities Total
Common Paid-In Retained Treasury Available- Shareholders'
Stock Capital Earnings Stock For-Sale Equity
------ ---------- -------- -------- ------------- -------------
Balances, May 1, 1994 $600,000 $1,200,000 $5,407,006 $(130,750) $ (36,188) $ 7,040,068
Net income -- -- 356,725 -- -- 356,725
Net change in
unrealized loss
on securities
available-for-sale -- -- -- -- (105,750) (105,750)
-------- ---------- ---------- --------- --------- -----------
Balances, October 31, 1994 $600,000 $1,200,000 $5,763,731 $(130,750) $(141,938) $ 7,291,043
======== ========== ========== ========= ========= ===========
Balances, May 1, 1995 $600,000 $1,200,000 $5,863,967 $(130,750) $(136,066) $ 7,397,151
Net income -- -- 326,408 -- -- 326,408
Net change in unreal-
ized loss on securities
available-for-sale -- -- -- -- 95,491 95,491
-------- ---------- ---------- --------- --------- -----------
Balances, October 31, 1995 $600,000 $1,200,000 $6,190,375 $(130,750) $ (40,575) $ 7,819,050
======== ========== ========== ========= ========= ===========
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
71
98
F & M BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended October 31, 1995 and 1994
(Unaudited)
- --------------------------------------------------------------------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 326,408 $ 356,725
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 42,066 37,118
Provision for loan losses 82,000 54,615
Net amortization on securities 10,498 56,483
Loss on sale of premises and equipment 10,622 --
Loss on sale of foreclosed assets -- 36,000
Change in accrued interest receivable (192,508) (151,985)
Change in other assets (2,368) 114,997
Change in accrued interest payable 15,988 (3,730)
Change in other liabilities 174,317 79,796
----------- -----------
Total adjustments 140,615 223,294
----------- -----------
Net cash from operating activities 467,023 580,019
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities
held-to-maturity 1,050,000 1,250,000
Purchase of securities held-to-maturity -- (1,195,000)
Loans made to customers and principal
collections, net 20,467 (1,359,558)
Proceeds from sale of property and equipment 66,704 --
Property and equipment expenditures (92,968) (47,795)
Proceeds from sale of foreclosed real estate -- 92,000
----------- -----------
Net cash from investing activities 1,044,203 (1,260,353)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits 4,660,065 (625,930)
----------- -----------
Net cash from financing activities 4,660,065 (625,930)
----------- -----------
Net change in cash and cash equivalents 6,171,291 (1,306,264)
Cash and cash equivalents at beginning of period 1,813,747 4,577,519
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,985,038 $ 3,271,255
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 933,685 $ 882,170
Income taxes 150,000 40,151
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
72
99
F & M BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995 AND 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allowance For Loan Losses: The allowance for loan losses represents that amount
which management estimates is adequate to provide for losses on existing loans,
based on an evaluation of the loan portfolio and prior loan loss experience. The
evaluation, which is necessarily subjective, takes into consideration such
factors as changes in the nature and volume of the loan portfolio, the level and
seriousness of delinquencies and problem loans, and current economic conditions
which may affect the borrowers' ability to pay.
The allowance is established through a provision for loan losses charged to
expense. The allowance is reduced by charging off loans deemed uncollectible by
management. After a loan is charged off, collection efforts continue, and any
recoveries of loans previously charged off are added to the allowance.
Financial Accounting Standards Board (FASB) Standard No. 114 was adopted at MayCorporation effective January 1, 1995. Under this standard, loans
considered to be impaired are reduced to the present value (using the loan agreement rate) of expected future
cash flows or
to the fair value of collateral, by allocating a portion of the
allowance for loan losses to such loans. If these allocations cause the
allowance for loan losses to require increase, such increase is reported as bad debt expense.part
of the provision for loan losses. The effect of adopting this standard is
reported within the provision for loan losses, and was not material for 1995.
(Continued)
F-10
74
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Smaller balance homogeneous loans are defined as residential first mortgage
loans secured by one-to-four family residences, residential construction loans,
student loans, home equity and second mortgage loans, and automobile loans and
are evaluated collectively for impairment. Commercial real estate loans and
other commercial loans are evaluated individually for impairment. In general,
loans classified as doubtful or loss are considered impaired while loans
classified as substandard are individually evaluated for impairment. Depending
on the relative size of the credit relationship, late or insufficient payments
of 30 to 90 days will cause management to reevaluate the consolidated financial
statements.credit under its normal
loan evaluation procedures. While the factors which identify a credit for
consideration for measurement of impairment, or nonaccrual, are similar, the
measurement considerations differ. A loan is impaired when the economic value
estimated to be received is less than the value implied in the original credit
agreement. A loan is placed in nonaccrual when payments are more than 90 days
past due unless the loan is adequately collateralized and in the process of
collection. Although impaired loan and nonaccrual loan balances are measured
differently, impaired loan disclosures under SFAS Nos. 114 and 118 are not
expected to differ significantly from nonaccrual and renegotiated loan
disclosures.
INTEREST INCOME: Interest Income on Loans: Theloans is accrued over the term of the loans based
upon the principal outstanding, except where collectibility is in question, in
which case the accrual of interest is discontinued. Management reviews loans
delinquent 90 days or more to determine if interest accrual should be
discontinued based on the estimated fair market value of the collateral.
Effective January 1, 1995, under SFAS No. 114 as amended by SFAS No. 118, the
carrying values of impaired loans are periodically adjusted to reflect cash
payments, revised estimates of future cash flows, and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported as bad debt expense or as reductions in bad debt expense.
NOTE 2 - SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115adjustments to the provision for loan losses.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally on April 30, 1994. Upon adoptionthe
straight-line method over the estimated useful lives of the standard,assets for financial
reporting purposes. For tax purposes, accelerated methods are primarily used.
OTHER REAL ESTATE OWNED: Real estate properties acquired through, or in lieu of,
loan foreclosure are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management classified
$3,000,000and the real estate is carried at the lower of investment securities as securities available-for-sale. On
November 15, 1995,cost or
fair value minus estimated costs to sell. The balance of other real estate owned
included in other assets in the Financial Accounting Standards Board issued a Special
Report entitled "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments In Debt and Equity Securities" (the Guide). The Guide
addresses questions regarding various SFAS No. 115 implementation issues. Of
particular interest is paragraph 61 which provides for a one-time opportunity
for an entity to reassess the appropriateness of the classifications of all
securities held and reclassify securities as deemed appropriate. Any
reclassifications must occur no later thanconsolidated balance sheets at December 31, 1995
and should be
accounted for1994 was $0 and disclosed in accordance with guidance provided in SFAS No.
115. The December 31, 1995 deadline applies not only to entities with calendar
year ends, but also to entities whose fiscal year does not correspond to the
calendar year. Restatement of financial statements of prior periods to reflect
the effects of any reclassifications is not permitted. Reclassifications from
the held-to-maturity category resulting from this one time reassessment will
not call into question the intent of management to hold other debt securities to
maturity in the future.
- --------------------------------------------------------------------------------
73$57,162, respectively.
(Continued)
F-11
100
F & M BANCORP AND SUBSIDIARY75
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBERDecember 31, 1995, 1994 and 1993
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
FEDERAL INCOME TAXES: In accordance with SFAS No. 109, Accounting for Income
Taxes, the Corporation uses an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities. This results in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. Federal income tax expense is the
tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
EARNINGS PER COMMON SHARE: Earnings per common share amounts are computed based
on the weighted average number of shares outstanding adjusted for the effect of
dilutive stock options. (See Note 13.) The number of weighted average shares was
76,036 in 1995, 79,249 in 1994 (UNAUDITED)and 78,883 in 1993.
STATEMENTS OF CASH FLOWS: For purposes of the statements of cash flows, the
Corporation considers cash on hand, cash due from other banks and federal funds
sold to be cash equivalents. The Corporation reports net cash flows for loans,
deposits and federal funds purchased with an initial maturity of 90 days or
less.
ACCOUNTING STATEMENTS ISSUED, NOT YET ADOPTED: The Financial Accounting
Standards Board has recently issued the following Statements which have not been
adopted by the Bank at December 31, 1995.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, requires the Bank to periodically consider
whether an impairment loss should be recognized on long-lived assets and other
certain identifiable intangible assets based on an estimate of future cash
flows.
SFAS No. 122, Accounting for Mortgage Servicing Rights, requires the Bank to
recognize mortgage servicing rights on loans it purchases or originates with the
intent to sell as an asset. It also requires that these capitalized mortgage
servicing rights be evaluated for impairment based on the fair value of those
rights.
SFAS No. 123, Accounting for Stock-Based Compensation, encourages but does not
require, the Bank to use a "fair valued-based method" to account for stock-based
compensation plans. If the fair value accounting encouraged by SFAS No. 123 is
not adopted, entities must disclose the proforma effect on net income and
earnings per share had the accounting been adopted.
(Continued)
F-12
76
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - --------------------------------------------------------------------------------NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
The Statements discussed above are required to be implemented for years
beginning after December 31, 1995. Although management of the Bank has not fully
analyzed these Statements, they believe the impact of their adoption will not be
material to the Bank's consolidated financial condition or results of
operations.
RECLASSIFICATIONS: Certain amounts in the 1994 and 1993 consolidated financial
statements have been reclassified to conform with the 1995 presentation.
NOTE 2 - SECURITIES (CONTINUED)
Management andCASH AND DUE FROM BANKS
Minimum cash balances, which are based on the Board of Directors are presently evaluating the Guide and
considering the reclassification of certain securities from held-to-maturity to
available-for-sale. Management has identified approximately $8,000,000 of
securities classified as held-to-maturity that may be transferred. The
unrealized loss on these securities totals $119,000 at October 31, 1995.
Furthermore, consideration is being given to selling these securities as well as
the securities presently classified as available-for-sale. If these securities
had been sold as of October 31, 1995, a loss of approximately $182,000 would
have been realized. The after-tax reduction to net income would have been
approximately $110,000. However, no decision to reclassify or to sell have been
made.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
A summarydeposit levels of the activity inBank, are
required to be maintained by the allowance for loan losses for the six months
ended OctoberFederal Reserve as legal reserve requirements.
Cash balances restricted from usage due to these requirements were approximately
$168,000 and $179,000 at December 31, 1995 and 1994, isrespectively.
NOTE 3 - SECURITIES
Securities have been classified in the Consolidated Balance Sheets according to
management's intent. The amortized cost and fair values of securities at
December 31, 1995 and 1994 are as follows:
AVAILABLE FOR SALE
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
1995
U.S. Treasury and federal
agencies $ 1,448,424 $ 15,963 $ (27,904) $ 1,436,483
Other corporate securities 213,304 5,446 218,750
----------- ----------- ----------- -----------
$ 1,661,728 $ 21,409 $ (27,904) $ 1,655,233
=========== =========== =========== ===========
1994
U.S. Treasury and federal
agencies $ 1,944,162 $ 8,056 $ (81,880) $ 1,870,338
State and political
subdivisions 2,500,000 2,500,000
Other corporate securities 227,951 (20,451) 207,500
----------- ----------- ----------- -----------
$ 4,672,113 $ 8,056 $ (102,331) $ 4,577,838
=========== =========== =========== ===========
(Continued)
F-13
77
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 3 - SECURITIES (Continued)
HELD TO MATURITY
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
1995
- ----
U.S. Treasury and federal
agencies $ 7,509,669 $ 1,793 $ (140,333) $ 7,371,129
State and political
subdivisions 2,907,072 41,397 (16,106) 2,932,363
Other corporate securities 251,235 1,515 252,750
Mortgage-backed securities 98,638 4,400 103,038
----------- ----------- ----------- -----------
$10,766,614 $ 49,105 $ (156,439) $10,659,280
=========== =========== =========== ===========
1994
- ----
U.S. Treasury and federal
agencies $ 9,945,097 $ 6,522 $ (676,560) $ 9,275,059
State and political
subdivisions 2,981,372 92,208 (113,230) 2,960,350
Other corporate securities 254,084 (1,784) 252,300
Mortgage-backed securities 111,620 (11,658) 99,962
----------- ----------- ----------- -----------
$13,292,173 $ 98,730 $ (803,232) $12,587,671
=========== =========== =========== ===========
The amortized cost and fair values of debt securities at December 31, 1995, by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. The mortgage-backed
securities mature in installments at various dates. Because of their variable
payments, mortgage-backed securities are not reported by a specific maturity
grouping.
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due in one year or less $ 449,270 $ 465,233 $ 1,370,930 $ 1,368,915
Due after one year
through five years 1,212,458 1,190,000 7,908,384 7,777,017
Due after five years
through ten years 1,388,662 1,410,310
----------- ----------- ----------- -----------
1,661,728 1,655,233 10,667,976 10,556,242
Mortgage-backed securities 98,638 103,038
----------- ----------- ----------- -----------
$ 1,661,728 $ 1,655,233 $10,766,614 $10,659,280
=========== =========== =========== ===========
(Continued)
F-14
78
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 3 - SECURITIES (Continued)
Proceeds from calls of securities held to maturity were $1,948,698 in 1995 and
$950,000 in 1994. Gains of $1,302 and $80 were realized on these calls in 1995
and 1994, respectively, and losses of $9,279 were realized in 1994.
Proceeds from the sale of investment securities available for sale were
$1,500,000 in 1995 with no gain or loss realized on these sales.
No securities that were classified as held to maturity were sold during 1995 or
1994.
Proceeds from debt securities which were called during 1993 were $1,578,400.
Gains of $7,275 and losses of $24,267 were realized on called securities for the
year ended December 31, 1993.
At December 31, 1995 and 1994, securities with an approximate carrying value of
$500,000 and $445,000, respectively, were pledged as collateral to secure public
deposits and for other purposes required or permitted by law.
NOTE 4 - LOANS
Loans at December 31, 1995 and 1994 are classified as follows:
1995 1994
---- ----
Commercial $ 694,890 $ 516,990
Installment 12,057,368 10,052,200
Real estate 12,248,523 12,557,559
Other 162,973 202,847
----------- -----------
$25,163,754 $23,329,596
=========== ===========
Installment loans include student loans which are being serviced by Great Lakes
Higher Education Corporation. The amount of student loans in this portfolio was
$4,283,746 and $5,382,605 at December 31, 1995 and 1994, respectively. These
loans are guaranteed by the Federal government.
CONCENTRATIONS OF CREDIT RISK: The Corporation grants commercial, installment,
home equity and real estate loans to customers primarily in the Barry County
area of Michigan. Certain loans are secured by real estate, automobiles and
various other items of collateral.
(Continued)
F-15
79
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for 1995, 1994 and 1993 are summarized
as follows:
1995 1994 1993
---- ---- ----
Balance May 1at beginning of year $ 643,008175,761 $ 602,038166,970 $ 198,244
Recoveries 8,337 16,891 4,410
Provision charged to operations 34,030 2,775
Loans charged off (18,097) (10,875) (35,684)
----------- ----------- -----------
Balance at end of year $ 200,031 $ 175,761 $ 166,970
=========== =========== ===========
At December 31, 1995, 1994 and 1993, the amount of loans 90 days or more past
due was $32,000, $61,900 and $9,764, respectively. During 1995, the Bank had no
loans which were impaired as defined under the provisions of SFAS Nos. 114 and
118.
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1995 and 1994 are summarized as follows:
1995 1994
---- ----
Building and improvements $ 908,757 $ 626,505
Equipment 978,052 967,378
----------- -----------
1,886,809 1,593,883
Accumulated depreciation (1,089,710) (1,009,068)
----------- -----------
797,099 584,815
Land 229,232 197,870
----------- -----------
$ 1,026,331 $ 782,685
=========== ===========
(Continued)
F-16
80
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 7 - DEPOSITS
The Corporation had an aggregate of $624,472 and $792,065 in certificates of
deposit issued in denominations of $100,000 or more as of December 31, 1995 and
1994, respectively. Interest expense on these deposits was $31,951 in 1995,
$45,849 in 1994 and $48,947 in 1993. Deposits accepted in the normal course of
business on behalf of related parties were approximately $216,000 as of December
31, 1995.
The schedule of maturity for certificates of deposits as of December 31, 1995
are as follows:
Maturing within one year $ 5,848,647
Maturing in one to three years 1,224,749
Maturing in three to five years 209,773
Maturing in five to ten years 108,318
-----------
$ 7,391,487
===========
NOTE 8 - FEDERAL INCOME TAXES
Federal income tax expense for the years ended December 31, 1995, 1994 and 1993
consists of the following:
1995 1994 1993
---- ---- ----
Current expense $ 201,166 $ 152,370 $189,250
Deferred expense (benefit) (12,800) (14,000) 30,100
--------- --------- --------
$ 188,366 $ 138,370 $219,350
========= ========= ========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995,
1994 and 1993, are as follows:
1995 1994 1993
---- ---- ----
Deferred tax assets
Allowance for loan loss $ 23,500 $ 13,000 $ 12,300
Deferred compensation 146,600 154,000 125,000
Unrealized loss on available
for sale securities 2,200 32,000
Other 2,000 7,500
----------- ----------- -----------
174,300 199,000 144,800
Deferred tax (liabilities)
Accrual to cash adjustment (118,000) (108,700) (98,700)
Fixed assets (16,700) (25,900) (35,500)
Other (7,800)
----------- ----------- -----------
(134,700) (142,400) (134,200)
----------- ----------- -----------
Net deferred tax asset $ 39,600 $ 56,600 $ 10,600
=========== =========== ===========
(Continued)
F-17
81
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 8 - FEDERAL INCOME TAXES (Continued)
No valuation allowance has been recorded against deferred tax assets.
Federal income tax expense differs from that computed at the federal statutory
corporate tax rate as follows:
1995 1994 1993
---- ---- ----
Statutory rate 34% 34% 34%
Tax expense at statutory rate $ 273,400 $ 184,000 $ 214,800
Tax exempt municipal interest income (57,400) (61,600) (52,100)
Nontaxable life insurance proceeds (33,600)
Disallowed interest expense 4,600 7,500 7,100
Other 1,366 8,470 49,550
--------- ---------- ---------
$ 188,366 $ 138,370 $ 219,350
========= ========== =========
Federal income tax expense (benefit) on net securities gains (losses) were $443,
($3,128) and ($5,777) in 1995, 1994 and 1993, respectively.
NOTE 9 - BENEFIT PLANS
The Corporation sponsors a defined benefit pension plan that covers
substantially all employees. The plan calls for benefits to be paid to eligible
employees at retirement based primarily upon years of service with the
Corporation and compensation rates. Contributions to the plan are determined in
accordance with the Employee Retirement Income Security Act of 1974 and with
appropriate Internal Revenue Service regulations.
Plan assets are invested in a guaranteed investment fund consisting primarily of
corporate debentures and real estate mortgages.
Pension expense includes the following components:
1995 1994 1993
---- ---- ----
Service cost - benefits earned during the
current period $ 27,383 $ 28,251 $ 21,591
Interest cost on the projected benefit obligation 25,733 25,494 18,984
Actual loss (return) on assets held in the plan (69,052) 39,999 (6,205)
Net amortization of unrecognized transition
assets and prior service costs (99) (99) (1,609)
Unrecognized gain or (loss) 55,670 (58,145) (11,881)
----------- ----------- -----------
$ 39,635 $ 35,500 $ 20,880
=========== =========== ===========
(Continued)
F-18
82
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 9 - BENEFIT PLANS (Continued)
The following sets forth the funded status of the plan at December 31:
1995 1994
---- ----
Actuarial present value of benefit obligations
Vested benefits $ (211,540) $ (239,012)
Nonvested benefits (16,971) (25,923)
----------- -----------
$ (228,511) $ (264,935)
=========== ===========
Fair value of plan assets $ 279,102 $ 251,217
Projected benefit obligation (372,937) (405,390)
----------- -----------
Projected benefit obligation
in excess of plan assets (93,835) (154,173)
Unrecognized net loss 45,498 104,494
Unrecognized transition asset (45,044) (48,262)
Unrecognized prior service cost 67,781 70,900
---------- -----------
Accrued pension liability $ (25,600) $ (27,041)
=========== ===========
The weighted average discount rate used to measure the projected benefit
obligation was 7.25% in 1995, 1994 and 1993. The rate of increase in future
compensation levels was 5% in 1995, 1994 and 1993. The expected long-term rate
of return on assets was 7.75% for 1995 and 8% for 1994 and 1993. Amortization of
prior service cost and unrecognized gains and losses is performed under the
straight-line method of amortization over the average remaining service period
of employees expected to receive benefits.
The Corporation has a 401(k) employee savings plan covering substantially all
employees. Contributions are voluntary and at the discretion of the Board of
Directors. Employee contributions cannot exceed the lesser of 15% of their
annual salary or the maximum allowable amount under current Internal Revenue
Code guidelines. The Corporation contributed $2,627, $3,627 and $3,189 to the
plan in 1995, 1994 and 1993, respectively.
The Bank has a deferred compensation and noncompete agreement with an officer
which provides that upon termination of employment resulting from retirement,
death or disability, the officer shall be paid $24,000 annually for a period of
five years. Deferred compensation expense for the years ended December 31, 1995,
1994 and 1993 was $19,783, $20,002 and $20,002, respectively.
The Bank provides a Selective Retirement Plan for certain retired and active
employees. The Corporation has committed to pay selected employees, or their
beneficiary, upon retirement or death, a monthly benefit for 10 years. The
retirement age was changed from age 65 to 60 in 1994 which increased the
December 31, 1994 liability by $45,000, net of tax. The Corporation has
purchased life insurance policies on the plan participants which had a cash
value of $226,000 and $228,000 at December 31, 1995 and 1994, respectively, and
is included in other assets. The estimated obligation under the plan is $331,494
and $373,000 as of December 31, 1995 and 1994, respectively, and is included in
other liabilities.
(Continued)
F-19
83
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments consist primarily of unused lines-of-credit. The
Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument is represented by the contractual
amounts of these instruments. The Corporation uses the same credit policies in
making such commitments as it does for loans recorded in the financial
statements. Since many commitments typically expire without being funded, the
total does not necessarily represent future cash requirements.
Financial instruments whose contract amounts represent credit risk at December
31 are as follows:
1995 1994
---- ----
Unused lines of credit $ 2,142,128 $ 2,021,911
Most of these commitments were made at variable rates tied to the prime rate of
interest.
NOTE 11 - RETAINED EARNINGS - DIVIDEND RESTRICTION
Banking regulations limit the amount of dividends that may be paid without prior
approval of the Bank's regulatory agency. Retained earnings of the Bank from
which dividends may be paid to the holding company were $715,085, $551,461 and
$653,699 at December 31, 1995, 1994 and 1993, respectively.
NOTE 12 - RELATED PARTY LOAN TRANSACTIONS
Certain directors and executive officers of the Corporation, including their
immediate families and companies in which they are principal owners, are loan
customers of the Bank. Total loans to these persons approximate $175,476 and
$146,974 at December 31, 1995 and 1994, respectively. During 1995 and 1994,
$80,000 and $0 related party loans were originated, respectively, and $51,498
and $24,034 of repayments were made on those loans, respectively.
NOTE 13 - STOCK OPTION
The Corporation has entered into a stock option agreement with an officer that
grants the officer options to purchase 5,000 shares of the Corporation's common
stock for a purchase price of $36 per share. The options are exercisable as
follows: 1,000 shares after expiration of the initial 12-month term of the
options and an additional 1,000 shares at the expiration of each 12-month period
thereafter. As of December 31, 1995, 4,000 shares are available for exercise.
The options will remain exercisable until the 10th anniversary of the date of
grant, except in the event of death or termination of employment. No stock
options have been exercised under the plan.
(Continued)
F-20
84
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 14 - COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Corporation has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. In addition, the Corporation is
involved in certain claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
adverse effect on the consolidated financial statements of the Corporation.
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:
Cash and cash equivalents
- -------------------------
For these short-term investments which include amounts due from other financial
institutions and federal funds sold, the carrying amount is a reasonable
estimate of fair value.
Securities
- ----------
For securities available for sale and held to maturity, estimated fair values
are based on quoted market prices or dealer quotes.
Loans, net of allowance for loan losses
- ---------------------------------------
The estimated fair value of loans, net of allowance for loan losses, is
principally estimated by discounting future cash flows using the current rates
at which similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities, and using prepayment assumptions for
residential family loans. The carrying value of the allowance for loan losses is
a reasonable estimate of fair value.
Federal Home Loan Bank (FHLB) stock and Federal Reserve Bank stock
- ------------------------------------------------------------------
The carrying amount is a reasonable estimate of the fair value for FHLB and
Federal Reserve Bank stock.
Deposits
- --------
The estimated fair value of noninterest-bearing demand deposits, NOW and money
market deposits and savings deposits is the amount payable on demand at the
reporting date. The estimated fair value of fixed-maturity certificates of
deposit is estimated by discounting future cash flows using the rates currently
offered for deposits of similar remaining maturities.
(Continued)
F-21
85
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(Continued)
Accrued interest receivable and payable
- ---------------------------------------
For accrued interest receivable and payable, the carrying amount is a reasonable
estimate of fair value.
Off-balance-sheet financial instruments
- ---------------------------------------
The Bank's commitments to extend credit and undisbursed loans are deemed to have
no fair value as such commitments are generally fulfilled at current market
rates.
The estimated fair values of the Bank's financial instruments are as follows:
December 31, 1995
-----------------
(in thousands)
Estimated
Carrying Fair
Value Value
----- -----
Financial assets
Cash and cash equivalents $ 6,858 $ 6,858
Securities 12,422 12,315
Loan, net of allowance for loan losses 82,000 54,615
Loans charged-off (62,780) (129,269)
Recoveries on loans previously charged-off 25,575 37,171
--------- ---------
Balance, October24,964 24,803
FHLB and Federal Reserve Bank stock 171 171
Accrued interest receivable 358 358
Financial liabilities
Noninterest-bearing demand deposits (8,863) (8,863)
NOW and money market deposits (13,539) (13,539)
Savings deposits (10,647) (10,647)
Certificates of deposit (7,391) (7,389)
Accrued interest payable (102) (102)
While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that were the Corporation to
have disposed of such items at December 31, 1995, the estimated fair values
would necessarily have been achieved at that date, since market values may
differ depending on various circumstances. The estimated fair values at December
31, 1995 should not necessarily be considered to apply at subsequent dates.
In addition, other assets and liabilities of the Corporation that are not
defined as financial instruments are not included in the above disclosures, such
as premises and equipment. Also, nonfinancial instruments typically not
recognized in financial statements nevertheless may have value but are not
included in the above disclosures. Excluded, among other items, are the
estimated earnings power of core deposit accounts, the trained work force,
customer goodwill and similar items.
(Continued)
F-22
86
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 16 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed financial information of Hastings Financial Corporation at
December 31:
CONDENSED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
---- ----
ASSETS
Cash and due from banks $ 687,8033,012 $ 564,555
========= =========3,768
Investment in subsidiary bank 4,910,861 4,567,424
Dividends receivable 169,792 137,142
----------- -----------
Total assets $ 5,083,665 $ 4,708,334
=========== ===========
LIABILITIES
Dividends payable $ 169,792 $ 137,142
TOTAL SHAREHOLDERS' EQUITY 4,913,873 4,571,192
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,083,665 $ 4,708,334
=========== ===========
Information regarding impaired(continued)
F-23
87
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 16 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
(Continued)
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Dividends from subsidiary bank $ 330,964 $ 137,142 $ 129,306
Other expenses 756 2,795 7,178
----------- ----------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY BANK 330,208 134,347 122,128
Equity in undistributed earnings
of subsidiary bank 285,503 268,408 290,231
----------- ----------- -----------
NET INCOME $ 615,711 $ 402,755 $ 412,359
=========== =========== ===========
(continued)
F-24
88
NOTE 16 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
(Continued)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 615,711 $ 402,755 $ 412,359
Adjustments to reconcile net income
to net cash from operating activities
Equity in undistributed earnings
of subsidiary bank (285,503) (268,408) (290,231)
Amortization of organizational costs 2,223 6,616
Change in dividends receivable (32,650) (137,142)
----------- ----------- -----------
Net cash from operating
activities 297,558 (572) 128,744
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (137,142) (129,306)
Repurchase and retirement of
common stock (161,172)
----------- -----------
Net cash from financing activities (298,314) (129,306)
----------- ----------- -----------
Net change in cash and cash equivalents (756) (572) (562)
Cash and cash equivalents
at beginning of year 3,768 4,340 4,902
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,012 $ 3,768 $ 4,340
=========== =========== ===========
F-25
89
HASTINGS FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
This discussion provides information about the consolidated financial condition
and results of operations of Hastings Financial Corporation (the "Corporation")
and its subsidiary National Bank of Hastings (the "Bank"), and should be read in
conjunction with the Consolidated Financial Statements
MATERIAL CHANGES IN FINANCIAL CONDITION
- ---------------------------------------
A comparison of the balance sheets from December 31, 1995, to June 30, 1996,
illustrates only one change of significance, total loans grew from $ 25.2
million to $ 27.0 million. This loan growth represents a change of $ 1.8 million
or an annualized rate of almost 15%. The loan growth occurred in the Bank's
indirect lending portfolio. The residential mortgage loan portfolio decreased
slightly from December 31, 1995, to June 30, 1996.
The funding of loan growth resulted from several sources: maturities of
securities; a reduction of cash and due from banks; net income from operations
and modest deposit growth.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
Analyzing results of the six month period ended June 30, 1995, with the six
months ended June 30 ,1996, indicates three items of note. Interest income
shifted from securities to loans and resulted in a $139,000 increase in total
interest income. The change of interest income is primarily attributable to a
movement of principal balances (volume) from a lower yielding securities
portfolio to a higher yielding loan portfolio.
The second item of note was a realization of $99,000 gain on a life insurance
policy in 1995.
The third item was a $43,000 reduction of Federal Deposit Insurance Corporation
(FDIC) assessment premium from the 1995 period as followscompared to the 1996 period.
The Bank's assessment rate changed to the FDIC minimum amount for 1996 which is
approximately $2,000 per year.
ACCOUNTING STANDARDS IMPLEMENTED IN 1996
- ----------------------------------------
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. The Statement requires review of such assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should be based
on the fair value of the asset. The Statement is effective for financial
statements for fiscal years beginning after December 15, 1995. The Corporation
adopted SFAS No. 121 effective January 1, 1996. The adoption had no material
effect on the Corporation's financial position or results of operations for the
six months ended June 30, 1996.
57
90
The FASB issued SFAS No. 122, Accounting for Mortgage Servicing Rights, in May
1995. This Statement changes the accounting for mortgage servicing rights
retained by the loan originator. Under this Statement, an entity that acquires
mortgage servicing rights through either the purchase or origination of mortgage
loans and sells or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage servicing rights
and the loans (without the mortgage servicing rights) based on their relative
fair values. Under current practice, all such costs are assigned to the loan.
The costs allocated to mortgage servicing rights are to be recorded as a
separate asset and amortized in proportion to, and over the life of, the net
servicing income. The carrying value of the mortgage servicing rights are to be
periodically evaluated for impairment. The Statement became effective for the
Corporation as of January 1, 1996. The adoption of SFAS No. 122 did not have a
material effect on the Corporation's financial position or results of operations
for the six months ended June 30, 1996.
In October 31, 1995:1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 encourages, but does not require, entities to use a
fair value based method to account for stock-based compensation plans. If the
fair value accounting encouraged by SFAS No. 123 is not adopted, entities must
disclose the pro forma effect on net income and on earnings per common share had
the fair value accounting been adopted. The Corporation has elected to not adopt
SFAS No. 123. However, the Corporation will provide any required proforma
disclosures in any future complete financial statements. The proforma
disclosures are not required in noncomplete interim financial statements.
58
91
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF HASTINGS FINANCIAL CORPORATION
AS OF JUNE 30, 1996
AND FOR THE SIX MONTHS THEN ENDED
59
92
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited)
1996 1995
---- ----
Average investment in impaired loans $750,000
Interest income recognized on impaired loans
including interest income recognized on
ASSETS
Cash and due from banks $ 3,248,912 $ 4,258,464
Federal funds sold 2,800,000 2,600,000
----------- -----------
Total cash basis $ 4,403
Interest income recognized on impaired loans onand cash basis $ --
Information regarding impaired loans at October 31,equivalents 6,048,912 6,858,464
Securities available for sale 1,631,728 1,655,233
Securities held to maturity (fair values:
1996 - $10,270,779; 1995 is as follows:
Balance of impaired loans $663,687
Less portion for which no allowance- $10,659,280) 10,427,836 10,766,614
Loans 27,036,630 25,163,754
Allowance for loan losses is allocated --
--------
Portion(210,984) (200,031)
----------- -----------
26,825,646 24,963,723
Premises and equipment, net 1,017,378 1,026,331
Accrued interest receivable 407,992 357,578
Other assets 487,242 511,814
----------- -----------
$46,846,734 $46,139,757
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand $ 8,940,432 $ 8,863,243
NOW and money market 13,118,479 13,539,396
Savings 10,651,264 10,647,428
Certificates of impaired loan balancedeposit 8,025,296 7,391,487
----------- -----------
40,735,471 40,441,554
Accrued interest payable 104,726 101,989
Other liabilities 726,581 682,341
----------- -----------
41,566,778 41,225,884
Shareholders' equity
Common stock, $1 par value: 400,000 shares
authorized, 79,463 and 75,463 shares
outstanding in 1996 and 1995, respectively 79,463 75,463
Capital surplus 730,581 590,581
Retained earnings 4,488,728 4,252,116
Net unrealized loss on securities available
for which
an allowance for credit losses is allocated $663,687
========
Portionsale, net of allowancetax of $9,693 in 1996 and
$2,208 in 1995, respectively (18,816) (4,287)
----------- -----------
5,279,956 4,913,873
----------- -----------
$46,846,734 $46,139,757
=========== ===========
See accompanying notes to consolidated financial statements.
60
93
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
Interest income
Loans, including fees $ 1,259,642 $ 1,055,576
Securities
U.S. Treasuries and federal agencies 235,929 321,942
State and political subdivisions 68,004 79,988
Other 16,568 18,807
Federal funds sold 51,885 16,532
----------- -----------
1,632,028 1,492,845
Interest expense 559,624 522,589
----------- -----------
NET INTEREST INCOME 1,072,404 970,256
Provision for loan losses allocated9,252 3,082
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,063,152 967,174
Other income
Service charges 175,235 148,913
Net gains on security sales and calls 1,302
Gain on life insurance policy 98,924
Other 19,290 5,579
----------- -----------
194,525 254,718
Other expenses
Salaries and wages 326,799 337,941
Pension and other employee benefits 100,925 123,217
Occupancy expense of bank premises 72,679 60,118
FDIC assessment 1,197 44,671
Equipment expenses 62,162 68,242
Supplies and postage expense 41,895 40,262
Professional services 35,643 22,444
Other 134,185 97,075
----------- -----------
775,485 793,970
----------- -----------
INCOME BEFORE FEDERAL INCOME TAX 482,192 427,922
Federal income tax expense 146,250 99,896
----------- -----------
NET INCOME $ 335,942 $ 328,026
=========== ===========
Earnings per common share $ 4.41 $ 4.26
====== ======
See accompanying notes to consolidated financial statements.
61
94
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended June 30, 1996
(Unaudited)
Net
Unrealized
Loss on
Securities Total
Common Capital Retained Available Shareholders'
Stock Surplus Earnings for Sale Equity
------ ------- -------- --------- -------------
BALANCE,
JANUARY 1, 1996 $ 75,463 $ 590,581 $4,252,116 $ (4,287) $4,913,873
Net income 335,942 335,942
Exercise of stock options 4,000 140,000 144,000
Cash dividends at $1.25
per share (99,330) (99,330)
Change in net
unrealized loss
on securities available
for sale, net of tax
of $(7,485) (14,529) (14,529)
---------- ---------- ---------- ---------- ----------
BALANCE,
JUNE 30, 1996 $ 79,463 $ 730,581 $4,488,728 $ (18,816) $5,279,956
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
62
95
HASTINGS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 335,942 $ 328,026
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 37,535 39,697
Net gains on security sales and calls (1,302)
Provision for loan losses 9,252 3,082
Net amortization of premiums and discounts
on securities (207,266) 193
Net change in assets and liabilities
Accrued interest receivable (50,414) (771)
Other assets 32,057 29,074
Accrued interest payable 2,737 7,005
Other liabilities 114,702 (440,211)
----------- -----------
Net cash from operating activities 274,545 (35,207)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale (50,000) (500,000)
Proceeds from sales of securities available for sale 1,500,000
Proceeds from maturities of securities
available for sale 585,110 1,500,000
Proceeds from maturities and calls of securities
held to maturity 1,525,000
Proceeds from principal paydowns on mortgage-backed
securities 12,425 65,664
Net change in loans (1,871,175) (819,558)
Purchases of premises and equipment, net (28,582) (4,505)
----------- -----------
Net cash from investing activities (1,352,222) 3,266,601
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 293,917 (963,174)
Dividends paid (169,792) (137,142)
Exercise of options on common stock 144,000
Repurchase and retirement of common stock (161,172)
----------- -----------
Net cash from financing activities 268,125 (1,261,488)
----------- -----------
Net change in cash and cash equivalents (809,552) 1,969,906
Cash and cash equivalents at beginning of period 6,858,464 3,051,689
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,048,912 $ 5,021,595
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the impaired loan balance $178,533
========period for
Interest $ 556,887 $ 515,584
Income taxes 126,711 53,000
- --------------------------------------------------------------------------------
74See accompanying notes to consolidated financial statements.
63
101
F & M BANCORP AND SUBSIDIARY96
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER(Unaudited)
June 30, 1996 and 1995
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and Article 10-01 of Regulation S-X. Accordingly, footnote
disclosures, which would substantially duplicate the disclosures contained in
the most recent audited financial statements, have been omitted. In the opinion
of management of the Corporation, all adjustments necessary for a fair
presentation of such financial information have been included. All such
adjustments are of a normal recurring nature. The results of operations and cash
flows for the six months ended June 30, 1996 may not be indicative of the
results for the entire year. The accompanying unaudited consolidated financial
statements should be read in conjunction with the notes to consolidated
financial statements contained in the December 31, 1995 AND 1994
(UNAUDITED)consolidated financial
statements.
NOTE 1 - --------------------------------------------------------------------------------EARNINGS PER COMMON SHARE
Earnings per common share are calculated on the basis of the weighted average
number of shares outstanding adjusted for the effect of dilutive stock options.
Earnings per common share are based on 76,130 and 76,915 shares for the six
months ended June 30, 1996 and 1995, respectively.
NOTE 2 - ACCOUNTING STANDARDS IMPLEMENTED IN 1996
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. The Statement requires review of such assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should be based
on the fair value of the asset. The Statement is effective for financial
statements for fiscal years beginning after December 15, 1995. The Corporation
adopted SFAS No. 121 effective January 1, 1996. The adoption had no material
effect on the Corporation's financial position or results of operations for the
six months ended June 30, 1996.
See accompanying notes to consolidated financial statements.
64
97
HASTINGS FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996 and 1995
NOTE 2 - ACCOUNTING STANDARDS IMPLEMENTED IN 1996 (Continued)
The FASB issued SFAS No. 122, Accounting for Mortgage Servicing Rights, in May
1995. This Statement changes the accounting for mortgage servicing rights
retained by the loan originator. Under this Statement, an entity that acquires
mortgage servicing rights through either the purchase or origination of mortgage
loans and sells or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage servicing rights
and the loans (without the mortgage servicing rights) based on their relative
fair values. Under current practice, all such costs are assigned to the loan.
The costs allocated to mortgage servicing rights are to be recorded as a
separate asset and amortized in proportion to, and over the life of, the net
servicing income. The carrying value of the mortgage servicing rights are to be
periodically evaluated for impairment. The Statement became effective for the
Corporation as of January 1, 1996. The adoption of SFAS No. 122 did not have a
material effect on the Corporation's financial position or results of operations
for the six months ended June 30, 1996.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 encourages, but does not require, entities to use a
fair value based method to account for stock-based compensation plans. If the
fair value accounting encouraged by SFAS No. 123 is not adopted, entities must
disclose the pro forma effect on net income and on earnings per common share had
the fair value accounting been adopted. The Corporation has elected to not adopt
SFAS No. 123. However, the Corporation will provide any required proforma
disclosures in any future complete financial statements. The proforma
disclosures are not required in noncomplete interim financial statements.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Installment loans on nonaccrual status totaled approximately $43,000 at October
31, 1995. These loans were not consideredSUBSEQUENT EVENT
In July of 1996, the Corporation announced that it had signed a definitive
agreement to be acquired by First Financial Bancorp, parent company of First
National Bank of Southwestern Ohio. The transaction will be structured as a
tax-free exchange and will be accounted for impairment, as they are
collectively evaluated for impairment due tounder the smaller-balance homogeneous
nature of the loans.
- --------------------------------------------------------------------------------
75pooling-of-interests
method.
(continued)
65
10298
PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY MANAGEMENT
For information regarding the principal shareholders of BancorpFirst Financial
and ownership of BancorpFirst Financial Common Stock by Bancorp'sFirst Financial's directors and
executive officers, see "Item 12. Security Ownership of Certain Beneficial
Owners and Management" in the BancorpFirst Financial Form 10-K, which is incorporated
herein by reference.
The following table sets forth certain information with respect to the
only persons known to F&MHastings Financial to own beneficially more than 5% of the
outstanding common stock of F&MHastings Financial as of the Record Date:
Number of Percent of Shares
Name and Address Shares Outstanding
------------------------------------ --------- -----------------
H. Robert/Elizabeth A. Bradley 628 11.15%
3601 Manitou Park Road
Rochester, IN 46975Richard T. Groos 28,472 35.39%
Hastings Financial Corporation
241 West State Street
Hastings, MI 49058
Larry J. Frederick/Patricia B. Hoffman 1,850 32.84%
C/O Hoffman, Luhman & Busch
700 Life Building
P.O. Box 99
Lafayette, IN 47902
Indiana Farmers Mutual Insurance Company 600 10.65%
NBD Trust & Investment Management
NBD Bank, NA
One Indiana Square, Suite 624
Indianapolis, IN 46266Kornstadt 5,773 7.17%
Hastings Financial Corporation
241 West State Street
Hastings, MI 49058
The following table sets forth certain information regarding the number
of shares of common stock of F&MHastings Financial beneficially owned by each
director of F&MHastings Financial and by all directors and executive officers of
F&MHastings Financial as a group as of the Record Date:
Number of Percent of Shares
Name Shares Outstanding
-------------------- --------- ------------------------------------
Wendell B. Bearss 34Jack E. Echtinaw 875 (1) .60%
H.1.09%
Richard T. Groos (2) 28,472 35.39%
Thomas T. Groos (2) 2,660 (3) 3.31%
Michael D. Humphreys 200 (4) 0.25%
Mark R.S. Johnson 200 0.25%
Larry J. Kornstadt 5,773 (5) 7.17%
Wade W. Nitz 150 0.19%
Robert Bradley 628 (2) 11.15%
Carol J. Bridge 20 (3) .36%
William J. Gordon 106 (4) 1.88%
J. Frederick Hoffman 1,850 (5) 32.84%
Robert E. Peterson 281W. Sherwood 2,250 (6) 4.99%
V. Lorene Rauschke 66 1.17%2.80%
David C. Wren 475 (7) 0.59%
All executive officers and
directors as a group
(9(11 persons) 3,021 53.63%
--------------------
(1) Of these, 24 shares are owned jointly with Mr. Bearss's wife.
(2) Of these, 200 shares and 10 shares are owned by Mr. Bradley's
wife and son, respectively, for which Mr. Bradley41,110 51.09%
--------------------
(1) All of Mr. Echtinaw's shares are owned jointly with his wife.
(2) Thomas T. Groos is the son of Richard T. Groos. The number of shares shown for each individual
does not include shares owned by the other. Thomas T. Groos disclaims beneficial ownership
of shares owned by Richard T. Groos and Richard T. Groos disclaims beneficial ownership of
shares owned by Thomas T. Groos.
(3) Of these, 1,460 shares are owned by Mr. Groos' children, for which Mr. Groos disclaims
beneficial ownership.
(4) All of Mr. Humphreys' shares are owned jointly with his wife.
(5) Of these, 5,216 shares are owned jointly with Mr. Kornstadt's wife.
(6) Of these, 2,000 shares are owned by a trust, of which Mr. Sherwood is the trustee and
beneficiary. Mr. Sherwood disclaims beneficial ownership of the shares owned by the trust.
(7) Of these, 100 shares are owned by Mr. Wren's wife, for which Mr. Wren disclaims beneficial
ownership.
(3) All shares are owned jointly with Ms. Bridge's husband.
(4) Of these, 6 shares are owned by Mr. Gordon's wife, for which Mr.
Gordon disclaims beneficial ownership, 25 shares are owned
jointly with Mr. Gordon's wife, and 30 shares are owned jointly
with Mr. Gordon's children and grandchildren.
(5) Of these, 50 shares are owned by Mr. Hoffman's wife, for which
Mr. Hoffman disclaims beneficial ownership.
(6) Of these, 50 shares are owned by Mr. Peterson's wife, for which
Mr. Peterson disclaims beneficial ownership.
76
66
10399
COMPARATIVE MARKET AND DIVIDEND INFORMATION
Nature Of Trading Market
- ------------------------
The BancorpFirst Financial Common Stock is quoted on the Nasdaq National
Market System under the symbol "FFBC". On _______November __, 19__,1996, the last reported
sale price of BancorpFirst Financial Common Stock as reported on the Nasdaq National
Market System was $______$_____ per share.
The F&MHastings Financial Common Stock is not traded on an established
public market. The last known trading price of F&MHastings Financial Common Stock
was $450.00$54.75 per share in August
1994.on December 14, 1995. As there is not an established public
trading market for the shares of F&MHastings Financial Common Stock, the stock is
not liquid and the price indicated above may not reflect the prices which would
be paid for such shares on an active market. The information should not
necessarily be relied upon when determining the value of a shareholder's
investment.
The following table sets forth, for the periods indicated, the high and
low sales prices per share of BancorpFirst Financial Common Stock as reported on the
Nasdaq National Market System. All prices have been adjusted to give retroactive
effect to stock dividends and stock splits.
BANCORP BANCORPFIRST FINANCIAL FIRST FINANCIAL
HIGH LOW
------- ---------------------- ---------------
1993
----
1992
First Quarter $22.09 $19.64
Second Quarter 23.18 21.00
Third Quarter 23.86 22.23
Fourth Quarter 24.55 23.18
1993
First Quarter 25.05 23.40$25.05 $23.40
Second Quarter 26.40 24.15
Third Quarter 32.55 25.50
Fourth Quarter 33.45 30.90
1994
----
First Quarter 39.80 29.20
Second Quarter 31.60 30.00
Third Quarter 32.20 30.20
Fourth Quarter 33.75 29.50
1995
----
First Quarter 34.75 32.50
Second Quarter 34.50 33.00
Third Quarter 35.50 33.00
Fourth Quarter (1)35.25 33.00
1996
----
First Quarter 35.50 33.50
Second Quarter 35.00 31.50
Third Quarter _____ _____
Fourth Quarter
through November __, 1996 _____ _____
--------------------
(1) Through ______ __, 199567
100
The following information reflects actual trade transactions in
F&MHastings Financial Common Stock made during 1993, 1994, 1995 and through
October 31, 1995.November __, 1996, for which management is aware of both the number of shares
traded and the selling price. Management is aware of other trades not listed
below, but is not aware of the selling price for such trades. The information
should not necessarily be relied upon when determining the value of a
shareholder's investment.
F&MHastings Financial Trades In
-----------------------------------------------------------------------------------------------------
1993 1994 1995(1) 1996(2)
-------- -------- --------- ---------
Number of trades 5 9 None7 2 1 0
Number of shares traded 40 55754 1,225 1,038 N/A
Selling price $435 $450$43.00-$48.50 $50.75 $54.75 N/A
- -------------------
(1) Does not include 2,904 shares repurchased at $55.50 per share and retired by Hastings Financial.
(2) Through November __, 1996
- -------------------
(1) Through October 31, 1995
As of ______November __, 1996, there were approximately _,________ holders of
record of the BancorpFirst Financial Common Stock. As of _________November __, 1996, F&MHastings
Financial had 10078 shareholders of record.
77
104
Dividends
- ---------
The following table sets forth the per share cash dividends declared on
BancorpFirst Financial and F&MHastings Financial Common Stock, respectively, for each
quarter since January 1, 1992. Bancorp1993. First Financial dividends have been adjusted to
give retroactive effect to all stock dividends and stock splits.
BANCORP F&M
------- ---FIRST FINANCIAL HASTINGS FINANCIAL
--------------- ------------------
1993
----
1992
First Quarter $.1800 $26.00
Second Quarter .1800 .00
Third Quarter .1800 .00
Fourth Quarter$ .1980 .00
1993
First Quarter .1980 26.00
Second Quarter .1980
.00
Third Quarter .1980
.00
Fourth Quarter .2160 .00$ 1.65
1994
----
First Quarter .2160
26.00
Second Quarter .2160
.00
Third Quarter .2160
.00
Fourth Quarter .3200 .001.75
1995
----
First Quarter .2600
30.00
Second Quarter .2600
.00
Third Quarter .2600
.00
Fourth Quarter .3000 .002.25
1996
----
First Quarter .3000
Second Quarter .3000 1.25
Third Quarter .3000 ______
Fourth Quarter
through November __, 1996 .____ ______
F&M68
101
Hastings Financial anticipates paying cash dividends in an amount not to exceed the
greatera regular dividend of (a) 30% of its net earnings for the year ending$1.25 per
share on or before December 31, 1995, or
(b) $198,000.1996. In the Merger Agreement, BancorpFirst Financial
and F&MHastings Financial agreed to cooperate with each other to ensure that,
from December 31, 1995 until the Effective Time, the
shareholders of F&M receive a quarterly cash dividend from either F&M or Bancorp
and that during the quarter in which the Effective Time occurs, the shareholders of
the Merger occursHastings Financial receive a cash dividend from either Hastings Financial or
First Financial and that such shareholders of F&M do not receive dividends from both
F&MHastings Financial and Bancorp.First Financial.
The future dividend policy of BancorpFirst Financial is subject to the
discretion of Bancorp'sFirst Financial's Board of Directors, cash needs, general business
conditions and dividends from subsidiaries.
For certain restrictions on the payment of dividends by BancorpFirst Financial
and F&MHastings Financial see "COMPARISON OF COMMON STOCK AND SHAREHOLDERS'
RIGHTS--DividendRIGHTS-- Dividend Rights."
7869
105102
COMPARISON OF COMMON STOCK AND SHAREHOLDERS' RIGHTS
The following summary comparison of the terms of the common stock of
F&MHastings Financial and Bancorp,First Financial, and the rights of holders thereof, does
not purport to be complete and is qualified in its entirety by reference to
Bancorp's and F&M'sFirst Financial's Articles of Incorporation, Bancorp'sHastings Financial's Articles of
Incorporation, First Financial's Code of Regulations and F&M'sHastings Financial's
By-Laws. Various features of the Articles of Incorporation and Code of
Regulations of BancorpFirst Financial differ from F&M'sHastings Financial's Articles of
Incorporation and By-Laws. The following discussion summarizes the differences
that are deemed to be material by Bancorp.First Financial.
Authorized But Unissued Shares
Bancorp's- ------------------------------
First Financial's Articles of Incorporation authorize the issuance of
25,000,000 shares, par value $8.00 per share, of BancorpFirst Financial Common Stock,
of which 12,568,64113,374,810 shares were issued and outstanding at SeptemberJune 30, 1995.1996. The
remaining authorized but unissued shares of BancorpFirst Financial Common Stock may be
issued upon authorization of the Board of Directors without prior shareholder
approval.
F&M'sHastings Financial's Articles of Incorporation authorize the issuance
of 6,000400,000 shares,
without par value $1.00 per share, of which 5,63380,463 shares were issued
and outstanding at September 30, 1995.July 31, 1996.
Dividend Rights
- ---------------
The holders of F&MHastings Financial and BancorpFirst Financial Common Stock are
entitled to dividends and other distributions when, as and if declared by their
respective Boards of Directors out of funds legally available therefor. Subject
to certain regulatory restrictions, dividends may be paid in cash, property or
shares of common stock, unless the entity is insolvent or the dividend payment
would render it insolvent.
In general, dividends by F&M are limited by Indiana law to the
balance of its undivided profit account adjusted for statutorily-defined bad
debts, losses and all other expenses.
The amount of dividends, if any, that may be declared by BancorpFirst
Financial following the purchase will necessarily depend upon many factors,
including without limitation, future earnings, capital requirements, business
conditions of subsidiaries (since BancorpFirst Financial will be dependent upon
dividends paid to it by its subsidiaries) and the discretion of Bancorp'sFirst
Financial's Board of Directors. Dividends paid to BancorpFirst Financial by its
subsidiary financial institutions are subject to the regulations of various
regulatory authorities. A Federal Reserve Board Policy Statement provides that
cash dividends paid by a bank holding company should meet the following two
guidelines: (1) the organization's net income available to common shareholders
over the past year should be sufficient to fully fund the dividends and (2) the
prospective rate of earnings retention by the organization appears consistent
with capital needs, asset quality, and overall financial condition. BancorpFirst
Financial has complied with the first guideline since its organization in 1983
and believes it has also complied with the second guideline.
70
103
Interested Shareholders
- -----------------------
Hastings Financial's Articles of Incorporation provides that an
"Interested Shareholder" shall mean any person (other than Hastings Financial,
National Bank of Hastings, the incorporator of Hastings Financial, any person
who was the beneficial owner of 10.0% or more of National Bank of Hastings
common stock prior to its acquisition by Hastings Financial, or any person who
is or was the beneficial owner of 10.0% or more Hastings Financial Common Stock
prior to the acquisition of National Bank of Hastings) who meets any one of the
following three requirements:
(a) is the beneficial owner, directly or indirectly, of 10.0% or
more of the voting power of the outstanding voting stock;
(b) is an affiliate of Hastings Financial and at any time within
the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of 10.0% or
more of the voting power of the then outstanding voting stock;
or
(c) is an assignee of or has otherwise succeeded to any shares of
voting stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned
by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
Hastings Financial's Articles of Incorporation require the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding
shares of Hastings Financial Common Stock, and the affirmative vote of 2/3 or
more of the outstanding voting shares not owned directly or indirectly by any
Interested Shareholder or an affiliate or associate of the Interested
Shareholder, for the authorization and adoption of:
(a) any merger or consolidation with any Interested Shareholder
or any other corporation which is, or after such merger or
consolidation would be, an affiliate of an Interested
Shareholder;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, either in one transaction or a series of
transactions, to or with any Interested Shareholder, or
affiliate of such shareholder, of any assets of Hastings
Financial having, measured at the time the transaction or
transactions are approved by the Board of Directors, an
aggregate fair market value of 10.0% or more, as measured as
of the end of the most recently ended fiscal quarter, of
Hastings Financial's net worth;
(c) the issuance or transfer of any securities of Hastings
Financial to any Interested Shareholder, or affiliate of such
shareholder, in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of 5.00% or more of the total market value of the
outstanding shares of Hastings Financial Common Stock;
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104
(d) the adoption of any plan or proposal for the liquidation or
dissolution of Hastings Financial proposed by or on behalf of
any Interested Shareholder or affiliate of such shareholder;
or
(e) any reclassification of securities or recapitalization of
Hastings Financial, any merger or consolidation with any of
its subsidiaries or any other transaction, whether or not
with or into or otherwise involving an Interested
Shareholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities which are
directly or indirectly owned by any Interested Shareholder or
affiliate of such shareholder.
The higher shareholder vote for the above transactions will not be
required for transactions where Hastings Financial shareholders will not receive
any cash or other consideration if the transaction is approved by a majority of
Hastings Financial's Continuing Directors. If Hastings Financial shareholders
will receive cash or other consideration under the terms of the proposed
transaction, the higher shareholder vote will not be required if the transaction
is approved by a majority of Hastings Financial's Continuing Directors or if the
consideration to be received meets certain requirements described in Hastings
Financial's Articles of Incorporation. In such situations, only the affirmative
vote required by Michigan law or other provisions of the Articles of
Incorporation is required.
FIRST FINANCIAL DID NOT OWN SHARES OF HASTINGS FINANCIAL COMMON STOCK
PRIOR TO SIGNING THE MERGER AGREEMENT AND DOES NOT INTEND TO OWN SHARES PRIOR TO
CONSUMMATION OF THE MERGER. FIRST FINANCIAL DOES NOT THEREFORE QUALIFY AS AN
INTERESTED SHAREHOLDER AND THE ABOVE PROVISIONS ARE NOT APPLICABLE TO THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
First Financial's Articles of Incorporation or Code of Regulations do
not contain a similar separation of shareholders owning a specified percentage
of its outstanding shares. First Financial is not aware of any shareholders who
beneficially own 5.00% or more of its outstanding common shares.
Continuing Directors
- --------------------
Hastings Financial's Articles of Incorporation provides that a
"Continuing Director" means each member of the first Board of Directors, any
member of the Board who is unaffiliated with the Interested Shareholder and was
a member of the Board prior to the time that the Interested Shareholder became
an Interested Shareholder and any successor of a Continuing Director who is
unaffiliated with the Interested Shareholder and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the Board. Of
the nine directors presently serving on Hastings Financial's Board, all are
classified as Continuing Directors. First Financial's Articles of Incorporation
and Code of Regulations do not contain a similar separation of directors.
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105
Directors
- ---------
After the Merger, F&M'sHastings Financial's Board of Directors will be
dissolved and Bancorp'sFirst Financial's Board of Directors will be the Board of
Directors for the Surviving Corporation.
The number of directors of BancorpFirst Financial can be no less than nine and
no more than 25. BancorpFirst Financial currently has 15 directors, divided into three
classes of five directors. The size of the Board can be increased or decreased
at any time by the affirmative vote of 2/3 of the whole authorized number of
directors or by a majority vote of the shareholders entitled to vote on the
proposal at a meeting of the shareholders called for the purpose of electing
directors and at which a quorum is present, either in person or by proxy. First
Financial's Board of Directors may not, under provisions of First Financial's
Code of Regulations, increase the authorized number of directors by more than
three positions during any period between annual meetings. Directors are elected
to three-year terms, with the term of office of one class expiring each year.
Shareholders of BancorpFirst Financial annually elect one-third of its Board of
Directors. This method of election could be considered an impediment for a
takeover of control of BancorpFirst Financial by third parties.
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106
F&M's By-Laws fixHastings Financial's Articles of Incorporation provide that the number
of directors at nine members, who shall be determined by resolution adopted by the affirmative vote
of at least 80% of the Board of Directors and a majority of the Continuing
Directors. Hastings Financial currently has nine directors, divided into three
equal classes of three directors. Directors are elected to three-year terms, with the
term of one class expiring each year.
According to the By-Laws, shareholders of F&M shall annually elect one-third of
its Board of Directors,year, which method of election could be
considered an impediment for a takeover or change of control of F&MHastings
Financial by third parties.
Despite F&M's
By-Laws, itsA majority of First Financial's directors in office at any time, though
less than a majority of the whole authorized number of directors, may, by a vote
of a majority of their number, fill any director's office that is created by an
increase in the number of directors or by a vacancy. Any directors so chosen
will hold office for the remaining length of the term; a vote by First Financial
shareholders is not required. An 80% majority of Hastings Financial's directors
then in office and at least a majority of Continuing Directors is required to
fill any vacancies in Hastings Financial's Board or fill any newly created
director positions. Any directors so chosen may hold office only until the next
annual meeting, at which time a vote by shareholders is required.
One or more directors of Hastings Financial may be removed at any time,
with or without cause, by either: (a) the affirmative vote of at least 80% of
the Board of Directors currently consistsand the affirmative vote of seven members electeda majority of Continuing
Directors; or (b) the affirmative vote of at least 80% of the outstanding shares
of Hastings Financial Common Stock at a meeting of shareholders called for termsthat
purpose. A First Financial director may be removed only if a court of one year each.
In itslaw finds
such director guilty of a felony or if the director has breached his fiduciary
duty under the laws of Ohio.
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106
First Financial's Code of Regulations Bancorp has an age limitation preventing
election or re-election of directors who have reached the age of 70 years or
older. F&M'sHastings Financial's Articles of Incorporation orand By-Laws do not contain
any such age limitation.
Quorum For Shareholders' Meetings
- ---------------------------------
Except as provided by law, the holders of record of a majority of
outstanding shares, in person or by proxy, are required for a quorum at all
BancorpFirst Financial shareholders' meetings. Except as provided by law,in its Articles of
Incorporation, or By-Laws, a majority of the outstanding voting shares, which may be
voted on the business to be transacted at any F&M shareholders' meeting,represented in
person or by proxy, shall constitute a quorum.quorum at any Hastings Financial
shareholders' meeting.
Meeting Participation By Use Of Communication Equipment
- -------------------------------------------------------
Hastings Financial's By-Laws allow shareholders to participate in a
shareholders' meeting and directors to participate in a directors' meeting by
using a conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other. First
Financial's Articles of Incorporation and Code of Regulations make no provision
for meeting participation using communication equipment, but Ohio statutes allow
directors to participate in a directors' meeting using such equipment.
Voting Rights
- -------------
The holders of F&MHastings Financial Common Stock and BancorpFirst Financial
Common Stock are entitled to one vote per share on all matters presented for
shareholder vote. Shareholders of BancorpFirst Financial or Hastings Financial do not
have cumulative voting rights in the election of directors.
F&M's Articles of Incorporation provide for cumulative voting.
Special Meetings
- ----------------
Special Meetings of the shareholders of BancorpFirst Financial may be called
for any purpose by the Board of Directors or by any three or more shareholders
owning, in the aggregate, not less than 50% percent of the stock of Bancorp.First
Financial. Notice of the meeting, including the purpose or purposes of the
meeting, must be mailed, postage prepaid, to every shareholder of record at the
address appearing on Bancorp'sFirst Financial's books at least 10 days prior to the date
of the meeting.
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107
Special Meetings of the shareholders of F&MHastings Financial may be
called by the Chairman of the Board of Directors, the President or the Secretary
pursuant to a resolution by the Board of Directors or upon receipt of a request
in writing, stating the purpose or purposes of the special meeting requested,
signed by shareholders of record owning in the aggregate, not less
than one-fourtha majority of allHastings Financial's
issued and outstanding shares of capital stock entitled to vote.shares. Notice of the meeting, including the purpose or
purposes of the meeting, must be delivered or mailed, postage prepaid, at leastnot less
than 10 days or more than 60 days prior to the date of the meeting to every
shareholder of record at the address appearing on F&M'sHastings Financial's books.
Not less than 20 days notice is required if the purpose of the meeting is to
vote on a plan of merger or consolidation or on a sale, lease, exchange or other
disposition of all, or substantially all, the property and assets of Hastings
Financial.
Preemptive Rights
- -----------------
As permitted by law, neither Bancorp'sFirst Financial's nor F&M'sHastings Financial's
Articles of Incorporation provide for preemptive rights.
Liquidation Rights
- ------------------
In the event of liquidation, the holders of shares of BancorpFirst Financial
Common Stock are entitled, subject to the payment in full of Bancorp'sFirst Financial's
debts and other liabilities, to receive pro rata any assets distributable to
shareholders with respect to the number of shares held by them. The same applies
to F&M.
80
107Hastings Financial.
Redemption And Assessment
- -------------------------
Shares of BancorpFirst Financial and F&MHastings Financial Common Stock are not
subject to further call or assessment. BancorpA bank holding company may redeem or
purchase shares of its Common Stock with funds legally available therefor,
provided it gives prior notice to the Federal Reserve Board if the consideration
to be paid for the purchase or redemption, when aggregated with the
consideration paid for all purchases or redemptions for the preceding last 12
months, equals or exceeds 10% of Bancorp'sits consolidated net worth. This prior
notification is not required if the bank holding company (a) exceeds the
thresholds established for a "well-capitalized" institution both before and
after the redemption, (b) received a composite "1" or "2" rating at its most
recent regulatory inspection, and (c) is not the subject of any unresolved
supervisory issues. First Financial currently meets these three requirements and
is not required to notify the Federal Reserve Board before purchasing shares of
its common stock. Redemptions may not be made when BancorpFirst Financial is insolvent
or, as a result of the redemption, would be rendered insolvent. Redemptions or
repurchases of F&MHastings Financial Common Stock are also subject to regulatory
limitations.
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108
Amendments To Articles And Code Of Regulations/By-Laws
- ------------------------------------------------------
The Articles of Incorporation for BancorpFirst Financial may be amended,
altered, changed or repealed by following the procedures prescribed by the laws
of the State of Ohio at the time of amendment.
F&M'sExcept as otherwise required in Hastings Financial's Articles of
Incorporation, its Articles may be amended, altered, changed or repealed by
following the procedures prescribed by the laws of the State of Michigan at the
time of amendment. Certain provisions of Hastings Financial's Articles of
Incorporation pertaining primarily to the Board of Directors require the
affirmative vote of at least 75%80% of the outstanding common shares to amend or
repeal such provisions. Amendment or repeal of certain provisions of Hastings
Financial's Articles of Incorporation pertaining primarily to shareholder
approval of business combinations involving Interested Shareholders require the
affirmative vote of at least 80% of the outstanding common shares entitled to
vote, including the affirmative vote of not less than 2/3 of Hastings
Financial's shares not owned directly or indirectly by any Interested
Shareholder. If amendments pertaining to amend, alter, changethe Board of Directors or repeal any provisionshareholder
approval of business combinations involving Interested Shareholders are approved
by a majority of Hastings Financial's Continuing Directors, the number of
affirmative votes prescribed by Michigan law will be required instead of the
Articles. F&M'shigher affirmative votes described above.
Hastings Financial's By-Laws may be amended by a majority vote of the entire
Board of Directors at any regular or special meeting, without prior notice of
the Board. Bancorp'sproposed amendment required, or by a majority vote of total shares
outstanding at any regular or special meeting if notice of the proposed
amendment was included in the meeting notice. First Financial's Code of
Regulations may be amended by a majority vote of shareholdersshares outstanding at any
regular or special meeting of shareholders.
Seventy-Five Percent (75%) Affirmative Shareholder Vote Requirement
F&M's Articles of Incorporation require the affirmative vote of at
least 75% of F&M's outstanding common shares entitled to vote to (1) amend,
alter, change, or repeal any provision of the Articles of Incorporation; (2)
authorize a special corporate transaction such as a merger, share exchange or
sale of all or substantially all of the assets of F&M; and (3) approve a
liquidation or dissolution of F&M. Bancorp's Articles of Incorporation and Code
of Regulations do not contain any such voting requirements.
Restrictions On Resale Of Bancorp Common Stock
The issuance of the shares of Bancorp Common Stock in connection with
the Merger has been registered under the Securities Act. Such shares may be
traded freely and without restriction under federal and state securities laws by
those shareholders not deemed to be "affiliates" of F&M as that term is defined
in Rules 144 and 145 under the Securities Act. "Affiliates" are generally
defined as persons who control, are controlled by, or are under common control
with F&M at the time of the F&M Special Meeting. Accordingly, affiliates of F&M
will generally include the directors and executive officers of F&M as well as
F&M's largest shareholders. In general, shares of Bancorp Common Stock received
by affiliates of F&M pursuant to the Merger may not be publicly resold without
registration under the Securities Act except pursuant to the volume and manner
of sale limitations and other requirements provided in Rules 144 and 145. This
Proxy Statement-Prospectus does not cover any resales of Bancorp Common Stock
received by affiliates of F&M. Any owner of F&M Common Stock who becomes an
affiliate of Bancorp will be subject to similar restrictions under Rule 144.
Pursuant to the terms of the Merger Agreement, in order for the Merger
to qualify for pooling-of-interests accounting treatment, none of the Bancorp
Common Shares held by shareholders who are affiliates of Bancorp or F&M may be
sold until such time as financial results covering at least thirty days of
post-Merger combined operations of Bancorp and F&M have been published (the
"Publication Date"). As a result, no shareholder who is an affiliate of Bancorp
or F&M will be permitted to sell any Bancorp Common Shares for the period from
the Effective Time to the Publication Date.
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108
In addition, in order to preserve the proposed tax-free status of the
Merger and in order to ensure that the continuity of shareholder interest
requirements related thereto, and set forth in Treasury Regulation Section
1.368-1(b), will be satisfied with respect to the Merger, certain shareholders
of F&M participating in the Merger will be required to execute a letter (the
"Tax Letter") indicating the number of Bancorp Common Shares, if any, received
by such shareholder in connection with the Merger with respect to which such
shareholder has a present plan or intention to dispose of or sell.
Except as provided above, there will be no restrictions on the transfer
of shares of Bancorp Common Stock issued by Bancorp pursuant to the Merger.
BancorpFirst Financial Shareholder Rights Plan
- ---------------------------------------
On November 26, 1993, BancorpFirst Financial adopted a shareholder rights plan
(the "Plan") and declared a dividend of one right on each outstanding share of
BancorpFirst Financial Common Stock ("Right") to shareholders of record as of December
6, 1993. Each share of BancorpFirst Financial Common Stock issued after December 6,
1993 will include one Right. Under the Plan, the Rights will actually be
distributed only if one or more of certain designated actions involving BancorpFirst
Financial Common Stock occur. See Note 1715 of Bancorp's 1994First Financial's 1995 Financial
Statements for more information on the Plan.
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109
ADJOURNMENT OF THE SPECIAL MEETING
The shareholders of F&MHastings Financial are asked to approve a proposal
to permit the adjournment of the Special Meeting, if necessary, to solicit
additional proxies with respect to the approval of the Merger Agreement. The
Merger Agreement must be approved by the affirmative vote of at least 75%a majority
of the outstanding shares of F&MHastings Financial Common Stock. If such matter
does not receive the requisite vote of shareholders at the Special Meeting and
does not receive a sufficient number of negative votes to assure the failure of
the matter, the Board of Directors may decide to adjourn the Special Meeting to
solicit additional proxies. If the Board of Directors decides to adjourn the
Special Meeting with respect to the Merger Agreement, the Chairman of the
Special Meeting will request a motion that the Special Meeting be adjourned for
up to 30 days. An adjournment of up to 30 days would not require either the
setting of a new meeting date or the giving of notice of the adjourned meeting.
Each proxy given in connection with the Special Meeting will be voted
on a motion for adjournment in accordance with the instructions contained
therein. If no contrary instructions are given, each proxy will be voted in
favor of any motion to adjourn the Special Meeting. The holders of the majority
of the shares of F&MHastings Financial represented in person or by proxy at the
Special Meeting will be required to approve a motion to adjourn the Special
Meeting.
If a motion to adjourn the Special Meeting is approved, no vote will be
taken on the Merger Agreement at the Special Meeting on ____________December __, 1996, but
the Merger Agreement will be voted upon at the adjourned meeting. Unless revoked
prior to its use, any proxy solicited for the Special Meeting will continue to
be valid and will be voted in accordance with the instructions contained therein
at the adjourned meeting.
Because the Board of Directors recommends that the shareholders vote
for the Merger Agreement, the Board of Directors similarly recommends that the
shareholders vote FOR the proposal to adjourn the Special Meeting, which will
facilitate the approval of the Merger Agreement. Such an adjournment would be
disadvantageous to shareholders who oppose the Merger Agreement because the
adjournment will give F&MHastings Financial additional time to solicit votes in
favor of the Merger Agreement, thereby increasing the chances of passing the
Merger Agreement proposal. F&MHastings Financial has no reason to believe that an
adjournment of the Special Meeting will be required.
If a quorum is not present at the Special Meeting, none of the
proposals will be acted upon, and the Board of Directors will adjourn the
Special Meeting to a later date in order to solicit additional proxies to assure
the presence of a quorum. The proposal to approve a motion to adjourn the
Special Meeting does not apply to an adjournment relating to the absence of a
quorum.
8377
110
EXPERTS
The consolidated financial statements of BancorpFirst Financial incorporated
by reference in First Financial Bancorp.'sFinancial's Annual Report on Form 10-K for the year ended
December 31, 1994,1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of F&MHastings Financial at April 30,December 31, 1995 and
1994 and for the yearyears then ended appearing in this Proxy Statement-Prospectus
have been audited by Crowe, Chizek and Company LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Hastings Financial for the year ended
December 31, 1993 appearing in this Proxy Statement-Prospectus have been audited
by Beene, Garter & Co., independent auditors, whose report dated January 14,
1994 expressed an unqualified opinion on those statements. The financial
statements for that year are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of BancorpFirst Financial Common Stock to be issued
in the Merger described herein and certain additional legal matters will be
passed upon by Frost & Jacobs, 2500 PNC Center, 201 East Fifth Street,
Cincinnati, Ohio 45202.
Certain legal matters in connection with the Merger will be passed upon
for F&MHastings Financial by Ice Miller DonadioWerner & Ryan, One American Square, Indianapolis, Indiana
46282-0002.
84Blank Co., L.P.A., 7205 West Central Avenue,
Toledo, Ohio 43617.
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111
APPENDIX A
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
F & M BANCORP
SEPTEMBER 11, 1995HASTINGS FINANCIAL CORPORATION
112
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
HASTINGS FINANCIAL CORPORATION
TABLE OF CONTENTS
-----------------
Page
----
1. Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- 1 -
2. The Merger; Effective Time of the Merger . . . . . . . . . . . . . . .- 2 -
3. Governing Law; Articles of Incorporation . . . . . . . . . . . . . . .- 2 -
4. Regulations1
2. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . 2
-3. Governing Law; Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . . 2 -
6. Conversion of Shares in the Merger . . . . . . . . . . . . . . . . . .- 2 -. . . . . . . . . . . . . . . . . . . . 3
6.1 FFB's Common Stock . . . . . . . . . . . . . . . . . . . . . . . . - 2 -. . . . . . . . . . . . . . . . . . . 3
6.2 F&M SharesHFC's Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -. . . . . . . . . . . . . . . 3
6.3 Consideration:Consideration; Exchange Ratio.Ratio . . . . . . . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . 3 -
6.4 Surrender of F&MHFC Certificates . . . . . . . . . . . . . . . . . . - 3 -. . . . . . . . . . . . . . . . . . . 4
6.5 Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . - 4 -
6.6 Bank Certificates . . . . . . . . . . . . . . . . . . . . . . . . - 4 -
7. Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . .- 4 -. . . . . . . . . . . . . . . . . . . . 5
8. Approval of the Shareholders; Filing of Articles of Merger . . . . . .-. . . . . . . . . . . . . . . . . . . . . . 5
-
9. F&M'sHFC's Representations and Warranties . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . . 5 -
9.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . 5 -
9.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 -
9.3 Information Furnished by F&M . . . . . . . . . . . . . . . . . . . - 5 -6
9.3 List of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 -. . . . . . . . . . . . . . . . . . . 6
9.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . 6 -
9.6 Good and Marketable Title . . . . . . . . . . . . . . . . . . . . - 6 -. . . . . . . . . . . . . . . . . . . 7
9.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . 7 -
9.8 Absence of Certain Changes or Events . . . . . . . . . . . . . . . - 7 -. . . . . . . . . . . . . . . . . . . 8
9.9 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . - 7 -. . . . . . . . . . . . . . . . . . . 8
9.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -. . . . . . . . . . . . . . . . . . . 9
9.11 Litigation and Proceedings . . . . . . . . . . . . . . . . . . . - 8 -. . . . . . . . . . . . . . . . . . . . 9
i
113
9.12 Material Contracts; No Conflict with Other Instruments . . . . . - 8 -. . . . . . . . . . . . . . . . . . . . 9
9.13 Governmental Authorizations and Filings . . . . . . . . . . . . . - 8 -. . . . . . . . . . . . . . . . . . . 9
9.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . - 8 -. . . . . . . . . . . . . . . . . . . . 9
9.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -. . . . . . . . . . . . . . . . . . . 10
9.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . - 9 -
- i -
113
. . . . . . . . . . . . . . . . . . . 10
9.17 Validity of Contemplated Transactions . . . . . . . . . . . . . .- 10 -. . . . . . . . . . . . . . . . . . . . 11
10. FFB's Representations and Warranties . . . . . . . . . . . . . . . . - 10 -. . . . . . . . . . . . . . . . . . . . 11
10.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . .- 10 -. . . . . . . . . . . . . . . . . . . . . 11
10.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 -. . . . . . . . . . . . . . . . . . . . 12
10.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . .- 11 -. . . . . . . . . . . . . . . . . . . . . 12
10.4 Shares to be Issued . . . . . . . . . . . . . . . . . . . . . . .- 11 -. . . . . . . . . . . . . . . . . . . . 12
10.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . .- 11 -. . . . . . . . . . . . . . . . . . . . . 12
10.6 Good and Marketable Title . . . . . . . . . . . . . . . . . . . .- 11 -. . . . . . . . . . . . . . . . . . . . 13
10.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- 12 -. . . . . . . . . . . . . . . . . . . . 13
10.8 Absence of Certain Changes or Events . . . . . . . . . . . . . .- 12 -
10.9 Information Furnished by FFB . . . . . . . . . . . . . . . . . .- 12 -
10.10. . . . 13
10.9 Litigation and Proceedings . . . . . . . . . . . . . . . . . . .- 12 -
10.11. . . . . . . . . . . . . . . . . . . . . 14
10.10 Material Contracts; No Conflict with Other Instruments . . . . - 13 -
10.12. . . . . . . . . . . . . . . . . . . . . 14
10.11 Governmental Authorizations and Filings . . . . . . . . . . . - 13 -
10.13. . . . . . . . . . . . . . . . . . . . . 14
10.12 Consents and Approvals . . . . . . . . . . . . . . . . . . . . - 13 -
10.14. . . . . . . . . . . . . . . . . . . . . 14
10.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 -
10.15. . . . . . . . . . . . . . . . . . . . . 15
10.14 Validity of Contemplated Transactions . . . . . . . . . . . . - 13 -. . . . . . . . . . . . . . . . . . . . . 15
11. Conduct of Business Pending the Merger . . . . . . . . . . . . . . . - 14 -
11.1 Negative Covenants of F&M . . . . . . . . . . . . . . . . . . . . - 14 -15
11.1 Negative Covenants of HFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.2 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -
11.3 Respective Efforts of FFB and F&M . . . . . . . . . . . . . . . - 14 -. . . . 15
11.3 HFC Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.4 Purchase of "Tail Coverage". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . - 15 -. . . . . . . . . . . . . . . . . . . . 16
12.1 Access and Information . . . . . . . . . . . . . . . . . . . . - 15 -. . . . . . . . . . . . . . . . . . . . . 16
12.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . - 15 -. . . . . . . . . . . . . . . . . . . . 16
12.3 Registration Statement . . . . . . . . . . . . . . . . . . . . - 15 -
12.4 Other Filings and Appeals . . . . . . . . . . . . . . . . . . . - 16 -
12.5. . 17
12.4 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . - 16 -
12.6. . . . . . . . . . . . . . . . . . . . . 17
12.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17 -
12.7. . . . . . . . . . . . . . . . . . . . . 18
12.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . - 17 -
12.8 Director and Officer Liability Insurance . . . . . . . . . . . - 17 -
12.9. . . . . . . . . . 18
12.7 Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
12.10 Audited Financial Statements . . . . . . . . . . . . . . . . . -. . . 18
-
12.11 SEC Filings12.8 Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
12.12. . . . . . . . . . . . . 19
12.9 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
12.13. . . . . . . . . . . . . . . . . . . . . 19
12.10 Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . - 19 -
12.14 Continued Employment of Bank Employees . . . . . . . . . . . . - 19 -
12.15 Publication of Financial Results . . . . . . . . . . . . . . . -. . . . . . 19
-12.11 Larry J. Kornstadt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ii
114
13. Conditions Precedent; Terminations . . . . . . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . . 20 -
13.1 Conditions Precedent to Obligations of the Parties . . . . . . -. . . . . . . . . . . . . . . . . . . . . 20 -
13.2 Conditions Precedent to FFB's Obligations . . . . . . . . . . . - 20 -
- ii -
114
. . . . . . . . . . . . . . . . . . . . 21
13.3 Conditions Precedent to F&M'sHFC's Obligation . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . 22 -
13.4 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . 23 -
13.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . .- 23 -. . . . . . . . . . . . . . . . . 24
13.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . 24
-
13.7 Closing14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- 24 -
14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .- 24 -
14.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . 24 -
14.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . 24 -
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- 24 -. . . . . . . . . . . . . . . . . . . 25
14.4 Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . 25 -
14.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . . 25 -
14.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .-. . . . . . . . . . . . . . . . . . . 25 -
14.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . - 25 -
14.8 Termination of Representations and Warranties . . . . . . . . . . . -. . . . . . . . 26 -
- iii -
115
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
F & M BANCORPHASTINGS FINANCIAL CORPORATION
PLAN AND AGREEMENT OF MERGER (hereafter called "this Agreement"(the "Agreement") dated as of September 11, 1995July 2,
1996 by and between FIRST FINANCIAL BANCORP., an Ohio corporation and
registered as a bank holding company under the Bank Holding Company Act of 1956
and a savings and loan holding company under the Savings and Loan Holding
Company Act ("FFB"), and F & M BANCORP, an IndianaHASTINGS FINANCIAL CORPORATION, a Michigan corporation
and registered as a bank holding company under the Bank Holding Company Act of 1956
("F&M"HFC"), pursuant to which FFB and F&MHFC hereby agree as set forth more fully
herein.
1. RECITALS
--------RECITALS.
1.1 FFB is a corporation duly organized and existing under the
laws of the State of Ohio, having been incorporated on August 8, 1982. F&MHFC is
a corporation duly organized and existing under the laws of the State of
Indiana,Michigan, having been incorporated on September 10, 1984.October 4, 1988.
1.2 The Boards of Directors of FFB and F&MHFC deem it advisable for
the general welfare and advantage of FFB and F&MHFC and their respective
shareholders that FFB and F&MHFC merge into a single corporation pursuant to this
Agreement and pursuant to the applicable provisions of the laws of the States
of Ohio and IndianaMichigan and the United States of America, subject to the approval
of various federal and state regulatory authorities.
1.3 As of December 31, 1994,May 1, 1996, the authorized capital stock of FFB
consisted of 25,000,000 shares of common stock, par value $8.00 per share, (the
"FFB Shares"), of
which 12,204,57513,388,384 shares were outstanding.
1.4 As of the date hereof, F&M isthe authorized to issue 6,000capital stock of HFC
consisted of 400,000 shares of common shares, withoutstock, $1.00 par value, (the "F&M Shares"), of which 5,63379,463
shares are
outstanding.were outstanding and 1,000 shares were reserved for issuance pursuant to
outstanding options.
1.5 In consideration of the foregoing premises and of the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable statutory provisions of the laws of the States of Ohio and Indiana,Michigan, the United
States of America, and any regulatory approvals, that FFB and F&MHFC will be
merged pursuant to the terms and conditions of the merger hereby agreed upon
(hereafter called the(the "Merger") into a single corporation, which will be FFB, one of the
constituent corporations and which will continue its corporate existence and be
the corporation surviving the merger (said corporation hereafter being
sometimes called the "Surviving 116
Corporation"), and the parties covenant to
observe, keep, perform and carry into effect the Merger and this Agreement as
hereafter set forth.
116
2. THE MERGER; EFFECTIVE TIME OF THE MERGER. Upon satisfaction (or waiver)At the effective time of the conditions specifiedMerger,
the separate existence of HFC will be merged into the Surviving Corporation and
National Bank of Hastings (the "Bank"), a wholly owned subsidiary of HFC, will
continue as a wholly owned subsidiary of the Surviving Corporation.
Consummation of this Agreement will be effected on the later date on which
Articles of Merger in Section 13 below, articles of merger insubstantially the form and
substance reasonably satisfactory to the parties shall be executed andannexed hereto as Exhibit A are
filed in the offices of the Secretary of State of the States of Ohio and
Indiana,Michigan, respectively, in the manner provided by law. The dateafter satisfaction of the laterrespective requirements of
the federal regulatory agencies and of the applicable laws of the States of
Ohio and Michigan prerequisite to such filings.
The parties to this Agreement agree that they will work diligently to
consummate this Agreement on January 1, 1997. In the event that the parties
are unable to consummate this Agreement on January 1, 1997, the parties agree
that if all conditions precedent to the consummation of this Agreement as set
forth in Section 13 hereof have been satisfied on or before the fifteenth day
of any given month, the parties will consummate this Agreement as of the end of
the same month; provided, however, that if the conditions precedent to the
consummation of this Agreement are satisfied on the sixteenth day of any month
through the last day of such filings shall bemonth, the effective timeparties agree that they will consummate
this Agreement as of the Merger (the "Effective Time").
Promptly after the Effective Time, Farmers & Merchants Bank of Rochester,
Indiana (the "Bank"), a wholly owned subsidiary of F&M, shall be merged into
Indiana Lawrence Bank ("ILB"), a wholly owned subsidiaryend of the Surviving
Corporation (the "Bank Merger"). The Bank Merger will be effected pursuant tomonth immediately following such month, or
on such other date as the terms of an agreement of merger in form and substance reasonably
satisfactory to the parties.parties mutually agree.
3. GOVERNING LAW; ARTICLES OF INCORPORATION. The laws which are to
govern the Surviving Corporation are the laws of the State of Ohio. The
Articles of Incorporation of FFB, at the Effective Time,effective time of the Merger, will be
the Articles of Incorporation of the Surviving Corporation until the same will
be further amended or altered in accordance with the provisions thereof.
4. REGULATIONS.BYLAWS. The Regulations of FFB at the Effective Timeeffective time of the Merger
will be the Regulations of the Surviving Corporation until the same will be
altered or amended in accordance with the provisions thereof.
5. DIRECTORS AND OFFICERS. The directors of FFB at the Effective Timeeffective time of
the Merger will be the directors of the Surviving Corporation until their
respective successors are duly elected and qualified. Subject to the authority
of the Board of Directors as provided by law and the Regulations of the
Surviving Corporation, the officers of FFB at the Effective Timeeffective time of the Merger
will be the officers of the Surviving Corporation. The directors of Bank at
the effective time of the Merger will be the directors of Bank until their
respective successors are duly elected and qualified. Subject to the authority
of the board of directors of Bank as provided by law and the Bylaws of Bank,
the officers of Bank at the effective time of the Merger will continue to serve
as officers of Bank after the effective time of the Merger.
2
117
6. CONVERSION OF SHARES IN THE MERGER. The mode of carrying into effect
the Merger provided in this Agreement and the manner and basis of converting
the shares of the constituent corporation into shares of the Surviving
Corporation are as follows:
6.1 FFB'S COMMON STOCK. None of the shares of common stock, par
value $8.00 per share, of FFB issued at the Effective Timeeffective time of the Merger will
be converted as a result of the Merger, but all such shares (including shares
held in the treasury) will remain issued shares of common stock of FFB.
6.2 F&M SHARES.HFC'S COMMON STOCK. At the Effective Time,effective time of the F&M SharesMerger, each
share of HFC common stock outstanding immediately prior to the Effective Timeeffective time
of the Merger (except for dissenters' shares and as otherwise provided in Section 6.5) will by virtue of
the Merger be converted into shares of FFB common stock as determined pursuant
to Section 6.3 below, and the F&M Shareseach share of HFC common stock held in treasury
immediately prior to the Effective Timeeffective time of the Merger will be cancelled. - 2 -
117
6.3 CONSIDERATION: EXCHANGE RATIO.
-----------------------------
6.3.1 The number of FFB SharesPrior
to which the holders of F&M Shares
shall be entitled as a resulteffective time of the Merger, the outstanding stock options for HFC
common stock will be exercised for 5,000 shares of HFC common stock, and such
common stock will be entitled to the same conversion rights as set forth in
this Section 6.
6.3 CONSIDERATION; EXCHANGE RATIO.
6.3.1 The consideration to be paid to HFC's stockholders
pursuant to this Agreement (the "Deliverable Shares""Merger Price") shallis fixed at $10,000,000 payable
in FFB common stock if the effective time of the Merger is on or before January
1, 1997; provided, however, that if the effective time of the Merger is after
January 1, 1997, the Merger Price will be fixed at $10,000,000 plus a sum equal
to the Bank's earnings after January 1, 1997 excluding transaction-related
costs, which sum will be payable in FFB common stock. Notwithstanding any of
the foregoing to the contrary, dissenting shareholders of HFC who perfect their
rights under the laws of the State of Michigan will receive cash in such amount
per share of HFC which they own as determined by dividing $12,500,000in accordance with Michigan
Business Corporations Act Section 450.1762. At the effective time of the
Merger, each of the then issued and outstanding shares of HFC will be cancelled
and extinguished and, in consideration and in exchange therefor, the holders
thereof will be entitled, upon compliance with Section 6.4, to receive from FFB
a number of common shares of FFB equal to the Merger Price divided by the
mathematical average of the average of the closing daily bid and asked prices
for FFB Sharesstock on the National Association of SecuritiesSecurity Dealers Automated
Quotations System - National Market SystemQuotation ("NASDAQ") national market system for each of the twenty (20) consecutive trading days ending
on the secondat 4:00 p.m. (New York time) three trading daydays prior to the Effective Timeeffective time of
the Merger (the "Average Price""Exchange Ratio"); provided, however, that in, which resultant sum is multiplied by a
fraction, the event
that there occurs one or morenumerator of which is the number of HFC shares owned by such
individual trading days on which two
hundred (200) or fewer FFB Shares are traded as reported by NASDAQ
(collectively, "Low-Trade Days"), the Low-Trade Days will be ignoredholder and the closing price for FFB Sharesdenominator of which is the aggregate number of shares of HFC
stock issued and outstanding on the trading day or days immediately preceding
the first of said twenty consecutive trading days (excluding Low-Trade Days),
to the extent necessary, shall be taken into account in order that the
calculation of the Average Price be based on twenty (20) actual trading days on
which more than two hundred (200) FFB Shares are traded;such date; provided, further, however, that in the event
of the subdivision or split of the outstanding shares of FFB,
Shares, the payment of a
dividend in FFB Sharesstock or a capital reorganization, reclassification or
recapitalization affecting FFB stock, the closing price for FFB Shares
during some but not all of said trading days, the number of Deliverable SharesExchange Ratio will be adjusted
proportionately so that the holdersshareholders of outstanding F&M Shares
shallHFC
3
118
will receive thesuch number of shares of FFB Sharescommon stock that represents the same
percentage of the valueoutstanding shares of outstanding FFB Sharescommon stock at the Effective Timeeffective time of
the merger as would have been represented by the number of shares such
shareholders would have received if the eventrecapitalization had not occurred.
Each6.3.2 After determining the Exchange Ratio, each holder of
F&M Shares shall be entitled to a
portionoutstanding common stock of HFC after the effective time of the Deliverable Shares that is equal to the number of Deliverable
Shares multiplied by a fraction, the numerator of which is the number of F&M
Shares held by that shareholder immediately prior to the Effective Time and the
denominator of which is the number of F&M Shares outstanding immediately prior
to the Effective Time.
6.3.2 Each holder of F&M Shares outstanding immediately prior to the
Effective Time,Merger, upon
surrender to FFB, of one or more stock certificates
representing former shares of F&M, will be entitled to receive one or more stock certificates of
FFB into which the F&M Sharescommon stock of HFC so surrendered will have been converted.converted
as aforesaid. No dividends that may have been declared by FFB after the
Effective Timeeffective time of the Merger and prior to the surrender of F&MHFC shares will be
paid until such shares have been presented for exchange to FFB. FFB shall deliverwill make
delivery of certificates to F&MHFC shareholders within ten business days of
receipt by the Exchange Agent (as defined in Section 6.4 below) of F&MHFC
certificates.
6.4 SURRENDER OF F&MHFC CERTIFICATES. PriorAs soon as practicable after
the Merger becomes effective, the stock certificates representing common stock
of HFC issued and outstanding at the time the Merger becomes effective will be
surrendered for exchange to FFB. As promptly as practicable after the
Effective Time, FFB andeffective time of the Merger, First National Bank of Southwestern Ohio (the
"Exchange Agent") shall enter
into an Exchange Agent Agreement with respect to the Deliverable Shares, which
Agreement shall be subject to F&M's approval which shall not be unreasonably
withheld. The Exchange Agent Agreement shall require FFB to deliver the
Deliverable Shares to the Exchange Agent at the Effective Time. As promptly as
practicable after the Effective Time, the Exchange Agent shallwill prepare and mail to each holder of record of an
outstanding certificate or certificates prior thereto representing shares of
F&MHFC a letter of transmittal containing instructions for the surrender of the
certificate or certificates.
- 3 -
118certificates of HFC held by such holder. Upon surrender of the
F&M certificate or certificates that prior thereto represented shares of HFC in
accordance with instructions set forth in the letter of transmittal, such
holder shallwill be entitled to receive in exchange therefor, certificates
representing the number of whole shares of FFB into which the shares
represented by the certificate or certificates so surrendered shallwill have been
converted, without interest. As
part of its services, the Exchange Agent shall make itself available for at
least three business days during regular banking hours at the main office of
the Bank to accept and provide receipts for surrendered certificates. Approval
of the Exchange Agent Agreement by F&M and approvalAdoption of this Agreementagreement by the shareholdersstockholders of
F&M shallHFC will constitute ratification of the appointment of First National Bank of
Southwestern Ohio as the Exchange Agent for this purpose. The Exchange Agent
shallwill not be obligated to deliver certificates for FFB stock to a former
shareholderstockholder of F&MHFC until such former shareholderstockholder surrenders his or her
certificate or certificates representing shares of F&MHFC or, in default thereof,
an appropriate affidavit of loss and indemnity agreement or bond as may be
required by FFB. Until so surrendered for exchange, each such stock
certificate formerly representing F&M Sharescommon stock of HFC will be deemed for all
corporate purposes (except for the payment of dividends, which will be subject
to the exchange of stock certificates as above provided) to evidence the
ownership of the number of shares of common stock of the Surviving Corporation
that the holder thereof would be entitled to receive upon its surrender to FFB.
6.5 FRACTIONAL INTERESTS. No fractional shares of common stock of
FFB or certificate or scrip representing the same will be issued. In lieu
thereof, each holder of F&M SharesHFC's common stock having a fractional interest arising
upon thesuch conversion of F&M Shares in the Merger will be paid in cash by FFB for the additional fractional
interest. Such payment shallwill be equal to the fractional interest times the
Average Price.Exchange Ratio. This amount shallwill not be paid to any holder of F&M
SharesHFC's common
stock who shallwill not have surrendered his certificates for exchange pursuant to
Section 6.4 hereof, and FFB shallwill retain such amount until such time as such
certificates have been surrendered.
6.6 BANK CERTIFICATES. Share certificates that name the Bank as
issuer but represent F&M Shares will be deemed share certificates representing
F&M Shares in connection with the Merger and for the purposes of rights and
obligations under this Agreement.4
119
7. EFFECT OF THE MERGER. At the Effective Time,effective time of the Merger, the
Surviving Corporation will succeed to, without other transfer, and will possess
and enjoy, all the rights, privileges, immunities, powers and franchises both
of a public and a private nature, and be subject to all the restrictions,
disabilities and duties of each of FFB and F&M,HFC, and all the rights, privileges,
immunities, powers and franchises of each of FFB and F&MHFC and all property,
real, personal and mixed, and all debts due to either of said constituent
corporations on whatever account, for stock subscriptions as well as for all
other things in action or belonging to each of said corporations, will be
vested in the Surviving Corporation; and all property, rights, privileges,
immunities, powers and franchises, and all and every other interest will be
thereafter as effectually the property of the Surviving Corporation as they
were of FFB and F&M,HFC, respectively, and the title to any real estate vested by
deed or otherwise in either of FFB and F&MHFC will not revert or be in any way
impaired by reason of the Merger; provided,provided; however, that all rights of
creditors and all liens upon any property of either of FFB or F&MHFC will be
preserved unimpaired, limited in lien to the property affected by such liens at
the Effective Time,effective time of the Merger, and all debts, liabilities and
- 4 -
119 duties of said
constituent corporations, respectively, will thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent as if
said debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
8. APPROVAL OF THE SHAREHOLDERS; FILING OF ARTICLES OF MERGER. This
Agreement will be submitted to the shareholders of F&MHFC for adoption and
approval.approval on or before November 30, 1996 [?], or such later date as the Boards
of Directors of FFB and HFC mutually approve. After such adoption and
approval, and subject to the conditions contained in this Agreement, articlesArticles
of mergerMerger in substantially the form annexed hereto as described in Section 2Exhibit A will be signed,
verified and delivered to the Secretary of State of the States of Ohio and
IndianaMichigan for filing as provided by the respective statutes of such states.
9. F&M'SHFC'S REPRESENTATIONS AND WARRANTIES. Except as provided in the schedules
contained in the disclosure statement attached hereto ("Disclosure Statement"),
F&MHFC represents and warrants to
FFB as of the date hereof and as of the Effective Timeeffective time of the Merger as
follows:
9.1 ORGANIZATION. F&MHFC is a corporation duly organized and validly
existing under the laws of the State of IndianaMichigan and is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended ("Bank
Holding Company Act"). F&Mamended. HFC
has the corporate power to carry on its businesses as they are now being
conducted and is qualified to do business in each jurisdiction in which the
character and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification, except
where the absencequalification. HFC, by order of such qualification would not have a material adverse
effect on its businesses or properties. The Board of
Directors, of F&M has authorized and directed the persons executingauthority to enter into this Agreement on behalf of F&M
to do so, and this Agreement, when
executed and delivered, will be legally binding upon F&M.binding.
5
120
9.2 CAPITALIZATION. F&M isHFC's capitalization consists of 400,000
authorized to issue 6,000shares of common shares,
withoutstock ($1.00 par value,value), of which, as of the date
hereof, 5,63379,463 shares arewere issued and outstanding.outstanding and 1,000 shares were
reserved for issuance pursuant to outstanding options. Each issued share of F&M was
validly issued, fully paid and non-assessable, and each outstanding share of F&M is
entitled to one vote. F&M
has not issued or granted nor is it a party to anyExcept for outstanding options exercisable for 1,000
shares of HFC common stock, there are no outstanding subscriptions, options,
warrants, calls or rights of any kind relating to or providing for the
issuance, sale, delivery or transfer of any class of securities of F&M.HFC.
9.3 INFORMATION FURNISHED BY F&M. In connection with FFB'sLIST OF INFORMATION. For the due diligence examination prior to the date hereof, F&M hasin
May, 1996, HFC delivered to FFB certain information concerning F&MHFC dated as of
the date furnished or such other
date as disclosed to FFB.furnished. Such information and the copies of documents furnished to
FFB are accurate in all material respects as of the date furnished
or such other date.furnished.
9.4 SUBSIDIARIES. F&MHFC has one wholly owned subsidiary, the Bank. F&MHFC
has no other subsidiaries. The Bank is a statenational bank duly organized and validly
existing under the laws of the State of Indiana. TheUnited States. Bank has the corporate power to
carry on its businesses as they are now being conducted and is qualified to do
business in each jurisdiction in which the character and location of the assets
owned by it, or the nature of the business transacted by it, requires
qualification, except where the absence of such qualification
would not have a material adverse
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120
effect on the businesses or properties of F&M. The Bank is authorized to issue
6,000 shares, par value $100 per share, of which, as of the date hereof, 6,000
shares are issued and outstanding.qualification. All of the Bank'soutstanding shares of the stock of Bank are validly
issued, fully paid and non-assessable, except as provided under federal banking
law, and, except as set forth in the Disclosure Schedule, all such shares are
owned by F&MHFC free and clear of all liens, claims, charges or encumbrances.
The Bank has not
issued or granted nor is it a party to anyThere are no outstanding subscriptions, options, warrants, calls or rights of
any kind relating to or providing for the issuance, sale, delivery or transfer
of any class of securities of the Bank.
9.5 FINANCIAL STATEMENTS. The Disclosure Statement will containHFC has delivered to FFB copies of F&M'sits
consolidated balance sheets as of April 30,December 31, 1995, and 1994, and F&M's1993 and the
related consolidated statements of income,earnings, changes in shareholders' equity,
and cash flows for each of the three years in the period ended April 30,December 31,
1995, 1994 and 1993. Except for
the 1993 financial statements and related notes (which are unaudited), in each case all such documents, including the notes thereto, will beall certified by Crowe, Chizek
and Company LLP, independent public accountants.accounts, or one of said accountants'
predecessor firms. The balance sheetsfinancial statements of HFC as of December 31, 1993 and
for the year then ended were audited by other auditors whose report expressed
an unqualified opinion on those statements.
All of such financial statements referred to in this Section are hereinafter referred topresent fairly the financial
positions as of and at the "F&M Financial Statements." F&M will deliverdates shown and the F&M Financial Statements to
FFB as soon as practicable after F&M receives them from said accountants. The
F&M Financial Statements will beresults of operations for the
periods covered thereby. They have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
indicated, except as otherwise indicated in the notes thereto. Each of the
balance sheets presents a true and complete statement in all material respects
as of its date of HFC's financial condition. All liabilities of F&MHFC (including
any contingent liabilities), as of the date of each balance sheet, will bewere
properly accrued in such balance sheet or disclosed in the related footnotes,
in accordance with generally accepted accounting principles, except
as may be noted therein.principles.
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121
9.6 GOOD AND MARKETABLE TITLE. F&MHFC and the Bank have and at the
Effective Timeeffective time of the Merger will have good and marketable title in fee simple
to all lands and buildings shown as assets of F&M or the Bank in their records and books of
account, except for properties held in trust or other fiduciary capacity, free and clear of all liens, encumbrances and charges except as
reflected in the F&M
Financial Statementsaforesaid financial statements and except for current taxes
and assessments not delinquent or being contested in good faith and liens,
encumbrances and charges shown in their records and books of account which are
not substantial in character or amount and do not materially detract from the
value or interfere with the use of the properties subject thereto or affected
thereby. F&MHFC and
the Bank have and at the Effective Timeeffective time of the Merger will have
valid leases under which they are entitled to occupy and use in their business
all real property of which they are lessees, and F&MHFC and the Bank have no knowledge
of any material default under any such lease. As of the date hereof, neither
F&MHFC nor the Bank has title to any real property or buildings as a result of
foreclosure or by otherwise realizing on collateral held by either of them.
Neither F&MHFC nor the
Bank shallwill take action to foreclose or otherwise realize on any
real property collateral held by either of them prior to the Effective Timeeffective time of
the Merger without the prior consent of FFB, which consent shallwill not be
unreasonably withheld.
F&MHFC and the Bank have and at the Effective Timeeffective time of the Merger will
have good and marketable title to the machinery, equipment, merchandise,
materials, supplies and other property of every kind, tangible or intangible,
contained in their offices and other facilities or shown as assets in their
records and books of account, except for properties held in trust or other
fiduciary capacity, free - 6 -
121
and clear of all liens, encumbrances and charges
except as reflected in the F&M
Financial Statementsaforesaid financial statements and except for liens,
encumbrances and charges, if any, which do not materially detract from the
value of or interfere with the use of the properties subject thereto or
affected thereby. F&MHFC and the Bank have and will have immediately prior to the
Effective Timeeffective time of the Merger valid leases under which they are entitled to use
in their business all personal property of which they are lessees, and neither
F&MHFC nor the Bank has any knowledge of any material default under any such leases.
9.7 TAXES. AllHFC and Bank have paid all taxes imposed by the United
States or by any state, municipality, subdivision or instrumentality of the
United States or by any other taxing authority, which are due or payable by
either F&MHFC or Bank, that the failure to pay would have a material and adverse
effect on HFC and/or Bank,
("Taxes"), and all claims asserted against each of them for the payment of
Taxes have
been paid in full or are adequately accrued in the records and books of
accounts of each of F&MHFC and the Bank and will be so paid or provided for at the
Effective Time.effective time of the Merger. All income tax returns for each of F&MHFC and the Bank for
tax years through and including 1994
have been filed with the taxing authorities having jurisdiction thereof through
the years specified in the Disclosure Schedule, and no extension of time for
the assessment of deficiencies for any such years is in effect. Neither F&MHFC
nor
the Bank has knowledge of any unassessed Taxtax deficiency proposed or threatened
against it.
7
122
9.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. From April 30, 1994Except as disclosed in
the disclosure schedule attached hereto (the "Disclosure Schedule), from
December 31, 1995 to the date hereof, there has not been:
9.8.1 any material change in or event affecting the corporate status, businesses,business,
operations or financial condition (financial or otherwise) of either of F&M
or theHFC and Bank, (whether or not covered by insurance), other than changes in the
ordinary course of business, which are not, in the aggregate, materially
adverse to F&M; orbusiness;
9.8.2 any declaration, setting aside or payment of any
dividend or other distribution, with respect to F&M Shares, except theHFC's common stock, except:
(a) a cash dividend of $30$1.25 per share to be paid on July 15, 1996; and (b) a
cash dividend of $1.25 per share to be paid on December 31, 1996; and
9.8.3 any other event or about February 1, 1995.condition of any character which has
materially and adversely affected the corporate status, business, operations or
financial condition of HFC and Bank taken as a whole.
9.9 CONTRACTS AND AGREEMENTS. Neither F&MExcept for agreements described in
and appended to the Disclosure Schedule, neither HFC nor the Bank is a party to:
(a) any sales agency agreement not subject to termination without liability on
notice of 60 days or less; (b) any contract for the purchase or sale of any
materials, products or supplies which contains any escalator, renegotiation or
redetermination clause or which commits it for a fixed term; (c) any contract
of employment with any officer or employee not terminable at will without
liability; (d) any pension, retirement or profit sharing plan or agreement not
cancelable within 60 days without liability;lability; (e) any management or consultation
agreement not terminable at will without liability; (f) any lease, license,
royalty, union agreement or loan agreement except those entered into in the
ordinary course of business;business and which are terminable without liability on
notice of 60 days or less; (g) any contract, accepted order or commitment for
the purchase or sale of materials, products or supplies having a total contract
price in excess of $20,000; or (h) any other agreement which materially affects
the business, properties, assets or condition (financial or otherwise) of F&M,HFC,
or which was entered into other than in the ordinary and usual course of
business. The Disclosure Statement containsSchedule will contain the following with respect to
each - 7 -
122
pension or profit sharing plan of F&MHFC and the Bank: a copy of the plan and
any relevant trust agreements, a copycopies of the 1994 Form 5500-C/Rforms filed with the Internal
Revenue Service, the latest report of the trustee or insurance company of the
value of the assets or the cash surrender values as of the latest anniversary
of the insurance polices held under the plan, and the latest actuarial
evaluation or statement of individual accounts.
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123
9.10 INSURANCE. HFC is adequately insured with respect to risks
normally insured against by companies similarly situated. The Disclosure
Statement containsSchedule will contain a list, and isbe accompanied by copies, of all existing
insurance policies of F&MHFC and the Bank, including but not limited to group
insurance and pension plans. All such policies are in full force and effect.
The Disclosure StatementSchedule will also containscontain a list of all claims for insured
losses filed by F&MHFC and the Bank during the three-year period immediately preceding
the date of this Agreement, including but not limited to worker's compensation,
automobile and general liability.
9.11 LITIGATION AND PROCEEDINGS. ThereExcept as set forth in the
Disclosure Schedule, there is no suit, action or legal or administrative
proceeding pending or, to the knowledge of F&M,HFC, threatened, against it or the Bank,
which, if adversely determined, might materially and adversely affect the
financial condition, on a consolidated basis, of F&MHFC and
the Bank or the conduct of
their businesses, nor is there any decree, injunction or order of any court,
governmental department or agency outstanding against F&MHFC or the Bank having any
such effect.
9.12 MATERIAL CONTRACTS; NO CONFLICT WITH OTHER INSTRUMENTS.
Neither F&MHFC nor the Bank is in default under the terms of any outstanding contract,
agreement, lease or other commitment which default would have a material and
adverse effect, on a consolidated basis, on F&MHFC and the Bank, and at the Effective Time,effective
time of the Merger, the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of or
constitute a default under any indenture, mortgage, deed of trust or other
agreement or instrument to which F&MHFC or the Bank is a party, which default or
breach would have a material and adverse effect, on a consolidated basis, on
F&MHFC and the Bank.
9.13 GOVERNMENTAL AUTHORIZATIONS AND FILINGS. Each of F&MHFC and the
Bank has all valid and sufficient licenses, franchises, permits and other
governmental authorizations for all businesses presently carried on by F&MHFC and
the Bank, respectively. F&Mrespectively, and has filed with the Federal Reserve Board all reports
necessary to the conduct of its business as a bank holding company and is
current in all respect as to such filings. F&M has providedHFC will provide in the Disclosure
StatementSchedule its Annual Reports on FormForms FRY-6 for 1990, 1991 and 1994
and on Form FRY-9 for 1990, 1991, 1992, 1993, 1994
and 1994,1995, proxy materials for its Annual Meetings in such years and will
provide proxy materials for its Annual Meeting in 1995. The1996. Bank has
providedwill provide in
the Disclosure StatementSchedule its Year-End Call Reports for 1991, 1992, 1993, 1994
and 1994,1995, when available, as filed with the Federal Deposit Insurance Corporation.Office of the Comptroller of the
Currency.
9.14 CONSENTS AND APPROVALS. Except for consents and approvals of
federal and state regulatory authorities, theThe only consent and approval
required to be obtained by or on behalf of F&MHFC or the Bank on or prior to the
Effective Timeeffective date of the Merger is the approval of the holders of seventy-five percentHFC shareholders in the
form required by the Michigan Business Corporations Act of the outstanding sharesState of
F&MMichigan. Other consents and approvals required to be obtained prior to the
effective date of the Merger are set forth in the manner provided by law.
- 8 -Section 10.12 below.
9
123124
9.15 BROKERS. Neither F&M, theHFC, Bank nor any of their officers,
directors or employees have employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with this Agreement or with the transactions
contemplated hereby.hereby, except that HFC has retained Austin Associates, Inc.
("Austin") to perform various brokerage services in connection with this
transaction. HFC is liable for and will pay all amounts due Austin.
9.16 ENVIRONMENTAL MATTERS. For purposes hereof, "environmental
laws" means all applicable federal, state or local statutes, laws, ordinances,
codes, rules, regulations and guidelines (including consent decrees and
administrative orders) relating to public health and safety and protection of
the environment and natural resources.
(a) F&MExcept as set forth in the Disclosure Schedule, to the
extent required, HFC and the Bank have filed all notices, permit applications and
other required governmental submissions and have obtained all permits, licenses
and other authorizations which are required and which are material in
connection with the conduct of their respective businesses under all applicable
environmental laws, including approvals relating to emissions, discharges,
releases or threatened releases, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants, chemicals, new or used petroleum
products, industrial, toxic or hazardous substances or solid wastes into the
environment (including, without limitation, ambient air, surface water,
groundwater, land or sewers).
(b) EachExcept as set forth in the Disclosure Schedule, to the
extent required, each of F&MHFC and the Bank is in compliance, in all material
respects, in the conduct of its business with all terms and conditions of the
necessary permits, licenses and authorizations, and to the best of their
knowledge is also in compliance in all material respects with all other
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in thesuch
environmental laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved under thesuch environmental laws.
(c) Neither F&MExcept as set forth in the Disclosure Schedule, neither
HFC nor the Bank is aware of, nor has either of HFC or Bank received notice of, or has
knowledge of, any
past or present events, conditions,condition, circumstances, activities, practices,
incidents, actions or plans which may materially interfere with or prevent
compliance or continued compliance in the conduct of its business with thesuch
environmental laws or any regulations, codes, plans,
orders, decrees, judgments, injunctions, noticescode, plan, order, decree, judgment,
injunction, notice or demand lettersletter issued, entered, promulgated or approved
under thesuch environmental laws, or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, study or proceeding,investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment (including, without limitation, ambient air,
surface water, groundwater, land or sewers), of any pollutant, contaminant,
chemical, or industrial, toxic or hazardous substance or waste or new or used
petroleum products.
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125
(d) Neither F&MExcept as set forth in the Disclosure Schedule, neither
HFC nor the Bank is aware of, nor has either of HFC or Bank received notice of, or has
knowledge of, any
material civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, investigation, or
proceeding pending or threatened against either F&MHFC or the Bank relating in any way
to the environmental laws or any regulation, code, plan, order, - 9 -
124
decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved under thesuch environmental laws.
(e) ToExcept as set forth in the Disclosure Schedule, to the
best knowledge of each of F&MHFC and the Bank, there is no asbestos-containingasbestos containing
material located on the premises on which F&M and the Bank
conduct their respective businesses the presence of whichthat violates any environmental law.law or is in need of removal or
repair.
9.17 VALIDITY OF CONTEMPLATED TRANSACTIONS. TheExcept as set forth in
the Disclosure Schedule, the execution, delivery and performance of this
Agreement will not: (i) violate, or conflict with, or require any consent
under, or result in a breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any material lien upon any of the assets of
either of F&MHFC or the Bank, under any of the terms, conditions or provisions of the
Articles of Incorporation or Bylaws of F&MHFC and the Articles of Association or
theBylaws of Bank, or of any material note, bond, mortgage, indenture, deed of trust,
material license, lease, agreement or other instrument or obligation to which
either of F&MHFC or the Bank is a party or by which either of F&MHFC or the Bank or any of
their assets may be bound or affected or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to F&M, theHFC, Bank or any
of their assets.
10. FFB'S REPRESENTATIONS AND WARRANTIES. FFB represents and warrants to
F&MHFC as of the date hereof and as of the Effective Timeeffective time of the Merger as
follows:
10.1 ORGANIZATION. FFB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended, and a savings and loan holding company under the Savings and Loan
Holding Company Act. FFB has the corporate power to carry on its businesses
as they are now being conducted and is qualified to do business in each
jurisdiction in which the character and location of the assets owned by it, or
the nature of the business transacted by it, requires qualification. FFB by order of its Board
of Directors, has
authority to enter into this Agreement and this Agreement is legally binding.
11
126
10.2 SUBSIDIARIES. Each indirect and direct subsidiary of FFB
which, as of the Effective Timeeffective time of the Merger would be deemed to be a
"significant subsidiary," as such term is defined in Rule 405 of the rules and
regulations promulgated in the Securities Act of 1933, as amended (the "1933
Act"), is either a national bank or federal savings association duly organized,
validly existing, and in good standing under a charter granted by the Office of
the Comptroller of the Currency or the Office of Thrift Supervision, or is a
corporation or state bank duly organized, validly existing and in good standing
under the laws of the state of its incorporation, and in either case, is duly
qualified to do business and is in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and where failure to so qualify would have a material and
adverse effect on the consolidated business, financial condition or results of
operations of FFB.
- 10 -
125
10.3 CAPITALIZATION. FFB's capitalization consists of 25,000,000
authorized shares of common stock (par value $8.00 per share), of which, as of
December 31, 1994, 12,204,575May 1, 1996, 13,388,384 shares were issued and outstanding. Each issued share
is validly issued, fully paid and nonassessable,non-assessable, and each outstanding share is
entitled to one vote.
10.4 SHARES TO BE ISSUED. All shares of common stock of FFB into
which F&M Sharesthe common stock of HFC will be converted will be, immediately after the
Effective
Timeeffective time of the Merger and when issued upon such conversion, duly and
validly authorized and issued, fully paid and nonassessable,non-assessable, and no
stockholder of FFB will have any preemptivepre-emptive right of subscription or purchase
in respect thereof. FFB shallwill take such steps as may be necessary for such
shares to be listed on NASDAQ immediately after the Effective Time.effective time of the
Merger.
10.5 FINANCIAL STATEMENTS. FFB will have delivered to F&MHFC copies
of its consolidated balance sheets as of December 31, 1995, 1994 1993 and 1992,1993, and
the related consolidated statements of earnings, changes in shareholders'
equity, and cash flows for each of the three years thenin the period ended December
31, 1995, in each case including the notes thereto, all certified by Ernst &
Young LLP, independent public accountants, or one of said accountant'saccountants'
predecessor firms (the "FFB Financial
Statements").firms.
All of the FFB Financial Statementssuch financial statements have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated, except as otherwise indicated in the notes thereto. Each of
such balance sheets presents a true and complete statement in all material
respects as of its date of FFB's financial condition. All liabilities of FFB
(including any contingent liabilities), as of the date of each balance sheet,
were properly accrued in such balance sheet or disclosed in the related
footnotes, in accordance with generally accepted accounting principles.
12
127
10.6 GOOD AND MARKETABLE TITLE. FFB has and at the Effective Timeeffective time
of the Merger will have good and marketable title in fee simple to all lands
and buildings shown as assets min its records and books of account, except for
properties held in trust or other fiduciary capacity, free and clear of all
liens, encumbrances and charges except as reflected in the FFB Financial Statementsaforesaid financial
statements and except for current taxes and assessments not delinquent or being
contested in good faith and liens, encumbrances and charges shown in itstheir
records and books of account which are not substantial in character or amount
and do not materially detract from the value or interfere with the use of the
properties subject thereto or affected thereby. FFB has and at the Effective Timeeffective
time of the Merger will have valid leases under which it is entitled to occupy
and use in its business all real property of which it is lessee, and FFB has no
knowledge of any material default under any such lease.
FFB has and at the Effective Timeeffective time of the Merger will have good
and marketable title to the machinery, equipment, merchandise, materials,
supplies and other property of every kind, tangible or intangible, contained in
its offices and other facilities or shown as assets in its records and books of
account, except for properties held in trust or other fiduciary capacity, free
and clear of all liens, encumbrances and charges except as reflected in the
FFB Financial
Statementsaforesaid financial statements and except for liens, encumbrances and charges,
if any, which do not materially detract from the value of or interfere with the
use of the properties subject thereto or affected thereby. FFB has and will
have immediately prior to the Effective Timeeffective time of the Merger valid leases under
which it is entitled to use in its
- 11 -
126 business all personal property of which it
is lessee, and FFB has no knowledge of any material default under any such
lease.
10.7 TAXES. All Taxestaxes imposed by the United States or by any
state, municipality, subdivision or instrumentality of the United States or by
any other taxing authority, which are due or payable by FFB, and all claims
asserted against it have been paid in full or are adequately accrued in the
records and books of accounts of FFB and will be so paid or provided for at the
Effective Time.effective time of the Merger. All income tax returns for FFB have been filed
with the taxing authorities having jurisdiction thereof for allthrough the years
through FFB's 1993
tax year,specified in the Disclosure Schedule, and no extension of time for the
assessment of deficiencies for any such years is in effect. FFB has no
knowledge of any unassessed tax deficiency proposed or threatened against it.
10.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 19941995
to the date hereof, there has not been:
10.8.1 any change in or event affecting the corporate status, businesses,business,
operations or financial condition (financial or otherwise) of FFB and its consolidated Subsidiaries,
other than changes in the ordinary course of business,business; and those changes
described in any FFB filings with the Securities and Exchange Commission, and those changes that may result from FFB's acquisitionnone
of Bright Financial Services Inc., of Flora, Indiana, and its subsidiary bank,
which are, not, in the aggregate, materially adverse to FFB;
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128
10.8.2 with respect to FFB's common stock, any declaration, setting
aside or payment of any dividend or other distribution, other than quarterly
dividends of $0.26 per share paid on January 1, 1995, April 1, 1995 and July 1,
1995; and
10.8.3 any other event or condition of any character which
has materially and adversely affected the corporate status, business,
operations or financial condition of FFB and its consolidated Subsidiaries
taken as a whole.
10.9 INFORMATION FURNISHED BY FFB. Neither this Agreement nor any
written report, statement, list, certificate or information furnished or to be
furnished by FFB to F&M in connection with this Agreement or any of the
transactions contemplated hereby (including, without limitation, any
information which has been or will be supplied by FFB with respect to its
business, operations, financial condition, directors and officers for inclusion
in the proxy statement and registration statement relating to the Merger)
contains or will contain (in the case of information relating to the proxy
statement at the time it is mailed and to the registration statement at the
time it becomes effective) any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
10.10 LITIGATION AND PROCEEDINGS. There is no suit, action or legal
or administrative proceeding pending, or to the knowledge of FFB threatened,
against it or any of FFB's consolidated Subsidiaries, which, if adversely
determined, might materially and adversely affect the financial condition, on a
consolidated basis, of FFB and FFB's consolidated Subsidiaries or - 12 -
127
the conduct
of their businesses, nor is there any decree, injunction or order of any court,
governmental department or agency outstanding against FFB or any of FFB's
consolidated Subsidiaries having any such effect.
10.1110.10 MATERIAL CONTRACTS; NO CONFLICT WITH OTHER INSTRUMENTS.
Neither FFB nor any of its consolidated Subsidiaries is in default under the
terms of any material outstanding contract, agreement, lease or other
commitment which default would have a material and adverse effect, on a
consolidated basis, on FFB and FFB's consolidated Subsidiaries, and at the
Effective Time,effective time of the Merger, the consummation of the transactions contemplated
by this Agreement will not result in the breach of any term or provision of or
constitute a default under any material indenture, mortgage, deed of trust or
other material agreement or instrument to which FFB or any of its consolidated
Subsidiaries is a party, which default or breach would have a material and
adverse effect, on a consolidated basis, on FFB and FFB's consolidated
Subsidiaries.
10.1210.11 GOVERNMENTAL AUTHORIZATIONS AND FILINGS. FFB and each of
FFB's consolidated Subsidiaries has all valid and sufficient licenses,
franchises, permits and other governmental authorizations necessary to the
conduct of its business as a bank holding company and has filed with the Board
of Governors of the Federal Reserve System ("FRB"), the Office of Thrift
Supervision and the Securities and Exchange Commission all reports necessary to
the conduct of its business as a bank holding company and savings and loan
holding company and is current in all respects as to such filings.
10.1310.12 CONSENTS AND APPROVALS. The consents and approvals required
to be obtained by FFB on or prior to the Effective Timeeffective date of the Merger are set
forth below:
10.13.110.12.1 approval and effectiveness of the Registration
Statement referred to in Section 12.3 or of any post effective amendment
thereto,
10.13.2thereto;
10.12.2 approval of FRB under Bank Holding Company Act;
10.12.3 approval of the FRB under the Bank Holding Company Act,
10.13.3 approvalOffice of the Department of Financial InstitutionsComptroller of the
State of Indiana ("Department"),Currency; and
10.13.410.12.4 any other required consents for the completion of the
Merger.
10.1414
129
10.13 BROKERS. Neither FFB nor any of its officers, directors or
employees have employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or with the transactions contemplated hereby.
10.15thereby.
10.14 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution,
delivery and performance of this Agreement will not: (i) violate, or conflict
with, or require any consent under, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien
upon any of - 13 -
128
the assets of FFB, or ILB, under any of the terms, conditions or provisions
of the Articles of Incorporation or bylaws of FFB, or ILB, or of any note, bond,
mortgage, indenture, deed of trust, material license, lease, agreement or other
instrument or obligation to which FFB or ILB is a party or by which FFB or any of its
assets may be bound or affected or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to FFB or ILB or any of theirits assets.
11. CONDUCT OF BUSINESS PENDING THE MERGER.
11.1 NEGATIVE COVENANTS OF F&M.HFC. From and after the date of this
Agreement and prior to the Effective Time,effective time of the Merger, without the prior
written consent of FFB, F&M will not:neither HFC nor Bank will:
11.1.1 amend its respective Articles of Incorporation,
Articles of Association, Regulations or Bylaws;
11.1.2 engage in any material activity or transaction or
incur any material obligation (by contract or otherwise) except in the ordinary
course of business or other than as described in this
Section 11;business.
11.1.3 issue rights or options to purchase or subscribe
to any shares of its sharescapital stock or subdivide or otherwise change any such
shares; orshares.
11.1.4 issue or sell any shares of its shares.capital stock,
except to fulfill the outstanding options issued to Larry J. Kornstadt.
11.2 DIVIDENDS. The parties agree to cooperate with each other to
insure that the shareholders of HFC receive a regular quarterly dividend from
either HFC or FFB during the quarter in which the effective time of the Merger
occurs, and that such shareholders of HFC do not receive dividends from both
HFC and FFB during such quarter.
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11.3 HFC EFFORTS. From and after the date of this Agreement and
prior to the Effective Time, neither FFB nor F&M will declare or pay any dividends on
or make any distributions in respecteffective time of any shares of its capital stock, except
that (i) FFB may declarethe Merger, HFC and pay, on or about the dates when such dividends
have customarily been declared and paid by it in the past, quarterly cash
dividends in the amount of $0.26 or more (plus such additional amount, which
may be stock dividends, if any, consistent with FFB's practices during recent
years as its Board of Directors may determine) per share during each calendar
quarter on the outstanding shares of FFB's common stock; and (ii) F&M may
declare and pay cash dividends in an amount not to exceed thirty percent (30%)
of F&M's net earnings as determined by F&M for the year ending December 31,
1995. For the period from December 31, 1995 until the Effective Time, and
assuming the financial condition of F&M justifies such action, the parties
agree to cooperate with each other to ensure that the shareholders of F&M
receive a quarterly cash dividend from either F&M or FFB and that during the
quarter in which the Effective Time occurs such shareholders of F&M do not
receive cash dividends from both F&M and FFB.
11.3 RESPECTIVE EFFORTS OF FFB AND F&M. From and after the date of
this Agreement and prior to the Effective Time, each of F&M and the Bank will makeuse their
respective reasonablebest efforts to preserve their respective business organizations intact; to
keep available the services of their respective
present officers and employees;employees and to
preserve the goodwill of their respective suppliers, customers and others having business
relations with whom they have business
relations.it. During the same period, neither F&M nor theHFC and Bank will not put into
effect any material increase in the compensation
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to officers or other key personnel in excess of compensation increases paid by
HFC or Bank to similarly situated employees in accordance with past practices.
11.4 PURCHASE OF "TAIL COVERAGE". HFC may purchase "tail coverage"
on its Directors' and Officers' insurance for a period of the Bank, except annual increases
effective in 1996 that doat least two years
and for a sum not exceedexceeding $10,000 in the aggregate five percent (5%) or as
to any individual six percent (6%).aggregate.
12. ADDITIONAL AGREEMENTSAGREEMENTS.
12.1 ACCESS AND INFORMATION. FFB and F&MHFC hereby agree that each
will give to the other and to the other's accountants, counsel and other
representatives full access during normal business hours throughout the period
prior to the Merger to all of its properties, books, contracts, commitments and
records, and that each will furnish the other during such period with all such
information concerning its affairs as such other party may reasonably request.
In the event of the termination of this Agreement, each party will, upon the
request of the other, destroy or deliver to the other all documents, work
papers and other material obtained from the other relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
and will use its best efforts to have any information so obtained and not
heretofore made public kept confidential.
12.2 CONFIDENTIALITY. From and after the date of this Agreement,
the parties and their respective Subsidiaries shall,will, and they shallwill cause their
respective directors, officers, employees and advisors ("Affiliates") to, treat
all information received from or on behalf of another party hereto or its
Affiliates concerning the business, assets, operations and financial condition
of such other party or its Subsidiaries as confidential, unless and to the
extent that the party receiving such information can demonstrate that such
information was in the public domain, and the party receiving such information
and its Subsidiaries shall,will, and shallwill cause their respective Affiliates to, not
use any such confidential information for any purpose except in furtherance of
the transactions contemplated by this Agreement. In the event this Agreement
is terminated pursuant to Section 13.4 hereof, each party and its Subsidiaries,
shallupon the request of the other, will promptly return to the other party or
destroy all documents and work papers and all copies thereof, containing any
such confidential information received from or on behalf of another party
hereto in connection with the transactions contemplated by this Agreement. The
covenants contained in this Section are of the essence and shallwill survive any
termination of this Agreement and the closing of the transactions contemplated
by this Agreement.
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12.3 REGISTRATION STATEMENT. FFB will use its best efforts to
prepare and file as soon as practicable with the Securities and Exchange
Commission ("SEC") a
Registration Statement on Form S-4 under the 1933 Act to register a sufficient
number of shares of common stock which the Deliverable Sharesshareholders of HFC will receive
pursuant to Section 6 at the Effective Time.effective time of the Merger. FFB will use its
best efforts to cause such Registration Statement to become effective.
FFB will use
reasonable efforts to make all proper filings under any applicable state
securities laws. The prospectus which forms a part of the Registration
Statement will also constitute the Proxy Statement of F&M for solicitation of
proxies in connection with the meeting of shareholders referred to in Section
13.3.7. The Registration Statement will comply in all material respects with
the rules and regulations of the Securities and Exchange Commission. Each of
the parties hereto will cooperate fully with each other in preparation of the
Registration Statement and Proxy Statement (and any and all amendments thereto)
and supply all information necessary, in the opinion of their respective
counsel, in order to complete the preparation of the Registration and Proxy
Statement. FFB will list the Deliverable Shares on NASDAQ.
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12.4 OTHER FILINGS AND APPEALS. FFB will have primary responsibility
for preparation of all applications for regulatory approval of the Merger
including but not limited to the preparation of: (i) an application or any
amendment thereto filed or to be filed by any party with the FRB under the Bank
Holding Company Act for authority to consummate the transactions contemplated
by this Agreement, the Articles of Merger and the Agreement of Merger; (ii) an
application or any amendment thereto filed or to be filed with the Department
for authority to consummate the transactions contemplated by this Agreement,
the Articles of Merger and the Agreement of Merger; and (iii) any application
or statements to be made by any party to any governmental body in connection
with such matters and in connection with plans and agreements of merger
heretofore or hereafter entered into between the parties hereto. FFB will
deliver copies of all applications to F&M prior to filing, keep F&M apprised of
the status of all applications and file the application with the FRB as
promptly as practicable following the date of this Agreement. Each of the
parties hereto shall use its best efforts, separately and jointly with the
other party, in good faith to take or cause to be taken all such steps as shall
be necessary or advisable to obtain all consents and approvals of governmental
authorities as are required by law or otherwise to effect the Merger. In the
event of an adverse or unfavorable determination by any regulatory authority,
or should the Merger be challenged or opposed by any administrative or legal
proceeding, whether by the United States Department of Justice or otherwise,
the determination of whether and to what extent to seek appeal or review,
administrative or otherwise, or other appropriate remedies shall be made by FFB
with the concurrence of F&M, which concurrence shall not be unreasonably
withheld, and FFB agrees to be fully responsible for the conduct of such review
or other proceeding.
12.5 EMPLOYEE BENEFIT PLANS.
Notwithstanding anything to the
contrary contained herein, (i) in the event that the Effective Time occurs
prior to the date on which the Bank makes its required contribution to the
Farmers and Merchants Bank Retirement Plan and Trust ("Retirement Plan") for
the 1995 plan year, as determined in accordance with the terms of the
Retirement Plan, the Surviving Corporation shall assume or cause ILB to assume
such obligation and shall make or cause ILB to make such required contribution
as soon as practicable after the amount of such required contribution shall be
determined; and (ii) the Surviving Corporation shall assume or cause ILB to
assume the obligation of the Bank to make a pro rata contribution to the
Retirement Plan for the period from December 31, 1995 until the Effective Time
(the "1996 Partial Plan Year"), in accordance with an amendment to the
Retirement Plan to be adopted by the Bank to require a Bank contribution to the
Retirement Plan for the 1996 Partial Plan Year.12.4.1 As soon as practicable after the Effective Time, buteffective
date of the Merger, FFB shall make available to eligible employees of Bank
nonqualified employee benefit plans comparable to the nonqualified employee
benefit plans then made available to similarly situated employees of other FFB
subsidiaries. Nonqualified employee benefit plans, fringe benefits and other
employee practices and policies in no eventeffect at Bank immediately prior to making the
required contribution
or contributions, if any, described in the preceding sentence, the Surviving
Corporation shall cause the terminationeffective date of the RetirementMerger shall continue in effect until modified or
terminated by FFB.
12.4.2 Pension Plan in a manner
which shall assure the tax-qualified status of the RetirementNational Bank of Hastings
("Bank Pension Plan") shall be merged into FFB Pension Plan upon
termination. Upon termination of the Retirement Plan, provisions will be made
for the distribution of each participant's account in accordance with the terms
of the Retirement Plan, the Internal Revenue Code, and the Employee Retirement
Income Security Act of 1974 ("ERISA"). Former employees of the Bank who are
employed by ILB as of the Effective Timeeffective
date of the Merger. In the case of a FFB Pension Plan participant who was a
Bank Pension Plan participant immediately prior to the effective date of the
merger, his or her FFB Pension Plan accrued benefit shall receive credit for theirconsist of a past
service benefit equal to his or her accrued benefit under the Bank Pension Plan
immediately prior to the effective date of the Merger plus a future service
benefit based upon his or her service after the effective date of the Merger
with the companies participating in FFB Pension Plan. Service with Bank for purposesprior
to the effective date of calculating years of servicethe Merger shall be counted for eligibility and
vesting purposes only under the First Financial Bancorp ThriftFFB Pension Plan.
12.4.3 The National Bank of Hastings 401(k) Employee
Savings Plan ("ThriftBank Savings Plan") shall continue in effect until the first
January 1 or July 1 coinciding with or next following the effective date of the
Merger (the "Initial Entry Date"). No contributions shall be made to the Bank
Savings Plan with respect to compensation paid after the Initial Entry Date and
the First Financial Bancorp Employees'
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131
Pension Plan ("Pension Plan"). Prior service withaccounts of all participants in the Bank Savings Plan shall notbecome fully
vested and nonforfeitable on the Initial Entry Date. After the Initial Entry
Date, the Bank Savings Plan may be credited, however,maintained as a frozen plan for purposes of calculating years of service for benefit
accrual purposes underan
indefinite period or merged into the PensionFFB Thrift Plan. Former employeesAs of the Bank who
satisfy the applicable eligibility requirements under the Pension Plan shall be
eligible to participate immediately in the Pension Plan as of the Effective
Time. Former employees of the Bank satisfying the applicable eligibility
requirements under theInitial Entry
Date, FFB Thrift Plan shall be eligibleextended to participate on the
first entry date (January 1 or July 1) following the Effective Time. Formereligible employees of Bank. Service
with Bank prior to the Bank who are employed by ILB aseffective date of the Effective TimeMerger shall also receive creditbe counted for
prior service witheligibility purposes under FFB Thrift Plan.
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12.4.4 Nothing contained in this Section shall be
deemed to constitute an agreement to employ or continue to employ any employee
of Bank or restrict the Bank for purposesright of determining
eligibility for all otherFFB to modify or terminate any employee
benefits offeredbenefit plan, policy or practice applicable to employees of ILB,
including, but not limitedBank.
Notwithstanding the foregoing to group health coverage, group term life and
accidental death and dismemberment coverage, and short-term and long-term
disability coverage. Former employeesthe contrary, FFB will honor the terms of the
Bank who satisfyDeferred Compensation and Non-Compete agreement with Larry J. Kornstadt and the
applicable
eligibility requirements to participate in said other employee benefits shall
be eligible to participate immediately therein as of the Effective Time. In
addition,six Selective Retirement Plans for Certain Employees, which employees are named
in the event that former employees of the Bank who are employed by
ILB as of the Effective Time are subjectDisclosure Schedule, and which agreements and plans were furnished to
any pre-existing conditions
exclusions or limitations under the group health plan for employees of ILB
("ILB Health Plan"), FFB or ILB shall either (i) obtain for said former
employees other health insurance comparableprior to the ILB Health Plan or (ii)
self-insure said former employees as necessary to place them in a position not
substantially more or less advantageous to them than if they were covered under
the ILB Health Plan. Furthermore, former employeesexecution of the Bank who are
employed by ILB as of the Effective Date shall receive credit under the ILB
Health Plan for amounts paid toward the satisfaction of the yearly deductibles
and yearly payment limits under the Bank's group health plan.
12.6this Agreement.
12.5 EXPENSES. Upon a termination of this Agreement as provided in
Section 13.4, each party will pay all costs and expenses of its performance of
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with, including fees, expenses and disbursements of
its accountants and counsel.
12.712.6 FURTHER ASSURANCES. If at any time the Surviving Corporation
will consider or be advised that any further assignment or assurance in law or
other action is necessary or desirable to vest, perfect, or confirm, of record
or otherwise, in the Surviving Corporation, the title to any property or rights
of F&MHFC acquired or to be acquired by or as a result of the Merger, the proper
officers and directors of F&MHFC and the Surviving Corporation, respectively, will
be and they hereby are severally and fully authorized to execute and deliver
such proper deeds, assignments and assurances in law and take such other action
as may be necessary or proper in the name of F&MHFC or the Surviving Corporation
to vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise carry out the purposes of this Agreement.
12.8 DIRECTOR AND OFFICER LIABILITY INSURANCE. Prior to the
Effective Time, F&M shall pay the single premium to continue insurance
coverage, under the policy of director and officer liability insurance
presently maintained by F&M or the Bank, insuring those individuals serving, at
any time during the three (3) years preceding the Effective Time, as directors
or officers of F&M or the Bank, with respect to claims made during the three
(3) years after the
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132
Effective Time as to acts or omissions occurring on or within the three (3)
years preceding the Effective Time.
12.912.7 POOLING. Each of F&M,Neither HFC, Bank, FFB and FFB'snor any of its consolidated
Subsidiaries has used and will use its best effortstaken or agreed to refrain from takingtake any action that would prevent F&MHFC and
FFB from accounting for the business combination to be effected by the Merger
as a "pooling of interests." F&MHFC has received from its independent
accountants, Crowe, Chizek and Company LLP, a letter stating that, based upon
Crowe, Chizek and Company'sCompany LLP's review of such relevant documents and
information which Crowe, Chizek and Company LLP deemed relevant, such firm is
currently unaware of any reason why the business combination to be effected by
the Merger cannot be accounted for as a "pooling of interests" in regard to F&MHFC
and the Bank. FFB has received from its independent accountants, Ernst & Young
LLP, a letter stating that, based upon Ernst & Young's review of such relevant
documents and information which Ernst & Young LLP deemed relevant, such firm is
currently unaware of any reason why the business combination to be effected by
the Merger cannot be accounted for as a "pooling of interests" in regard to FFB
and its consolidated Subsidiaries.
12.1018
133
12.8 AUDITED FINANCIAL STATEMENTS. As soon as reasonably
practicable, F&MHFC will deliver to FFB the information required by Item 17 of the
instructions to Registration Statement Form S-4, including but not limited to
a copy of its consolidated balance sheet as of April 30,December 31, 1995 and 1994 and
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years ended April 30,December 31, 1995, 1994 and 1993, and
such financial statements for the most recently ended fiscal year will be in
the format required by the Securities and Exchange Commission and will include
a Management's Discussion and Analysis of Financial Condition and Results of
Operations section. If the effective date of the Registration Statement
described in Section 12.3 is after October 31, 1995, F&MUpon request by FFB, HFC will deliver to FFB a copy of its
balance sheet (unaudited) and related statements of income and cash flows
(unaudited) for the six-monthsix and/or nine months period ending, October 31,June 30, 1996 and
1995, and/or the
nine-month period ending January 31,and September 30, 1996 and 1995, as applicable, in each case including
the notes thereto. All of such financial statements shallwill present fairly the
financial positions as of and at the datedates shown and the results of operations
for the periods covered thereby. They shallwill have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods indicated, except as otherwise indicated in the notes thereto. All
liabilities of F&MHFC (including any contingent liabilities), as of the date of
each balance sheet, shallwill be properly accrued in such balance sheet or disclosed
in the related footnotes in accordance with generally accepted accounting
principles. Each of such consolidated statements of earnings of F&M
shallHFC will be
fairly presented in accordance with generally accepted accounting principles
for the periods indicated.
12.11 SEC FILINGS. Within 15 days after the date hereof, FFB will
deliver to F&M copies of its Forms 10-K, 10-Q and 8-K that have been filed with
the SEC since December 31, 1992.
12.1212.9 PRESS RELEASES. The parties shallwill consult with each other as
to the form and substance of any press release, written communication with
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133
disclosure of matters related to this
Agreement, and a party shallwill not issue any such press release, written
communication, or public disclosure without the prior consent of the other
party, which consent shallwill not be unreasonably withheld or delayed; provided,
however, that nothing contained herein shallwill prohibit any party, following
notification to the other party, from making any disclosures which its counsel
deems necessary to conform with requirements of law or the rules of NASDAQ.
12.1312.10 FIDUCIARY RESPONSIBILITY. F&M shallHFC will not, directly or
indirectly, and shallwill instruct and otherwise use its diligent efforts to cause
its officers, directors, employees, agents and advisors not to, directly or
indirectly, solicit or initiate any proposals or offers from any person or
entity, or discuss or negotiate with any such person or entity, relating to any
acquisition or purchase of all or a material amount of the assets of, or any
equity securities of, or any merger or business combination with, F&MHFC (such
transactions are referred to herein as "Acquisition Transactions"),; provided,
however, that nothing contained in this section shallwill prohibit (i) F&MHFC from
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited proposal of an Acquisition
Transaction if and to the extent that (a) the Board of Directors of F&M,HFC, after
consultation with and based upon the written advice of legal counsel,
determines in good faith that such action is required for the directors of F&MHFC
to fulfill their fiduciary duties and obligations to the F&MHFC shareholders and
other constituencies under IndianaMichigan law, taking
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134
into consideration the bidding procedures engaged in connection with the
transactions contemplated hereby and (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
F&MHFC provides immediate written notice to FFB to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, or (ii) the Board of Directors of F&MHFC from failing to
make, withdrawing or modifying its recommendation to shareholders regarding the
merger with FFB following receipt of a proposal for an Acquisition Transaction
if the Board of Directors of F&M,HFC, after consultation with and based upon the written advice of legal counsel,
determines in good faith that such action is required for the directors of F&MHFC
to fulfill their fiduciary duties and obligations to the F&MHFC shareholders and
other constituencies under IndianaMichigan law, taking into consideration the bidding
procedures engaged in connection with the transactions contemplated hereby.
12.14 CONTINUED EMPLOYMENT OF BANK EMPLOYEES. FFB shall itself
employ, or cause ILB or another12.11 LARRY J. KORNSTADT. Larry J. Kornstadt agrees that he
will remain the President, Chairman and Chief Executive Office of its affiliates to employ,Bank for at least a
period of two (2) years aftersix months following the Effective Time, those persons who are
employeeseffective time of the Merger. Upon Mr.
Kornstadt's retirement from the position of President and Chief Executive
Officer of Bank, immediately prior to the Effective Time ("Retained
Employees") exceptMr. Kornstadt agrees that he will remain as Chairman of Bank
for voluntary terminationsso long as mutually agreed by Mr. Kornstadt and terminations for just causes.
During such period the compensation of a Retained Employee shall be reviewed,
but not reduced, in accordance with the "Indiana Lawrence Bank Pay System
Documentation and Review Procedures" in effect as of the date hereof.
12.15 PUBLICATION OF FINANCIAL RESULTS. In accordance with the
Codification of Financial Reporting Policies of the Securities and Exchange
Commission, in order to permit the sale of Deliverable Shares following the
Effective Time and also to preserve the treatment of the transactions described
herein as a pooling of interests for accounting purposes, FFB agrees to
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publish the financial results of the combined operations of FFB and F&M and the
Bank, covering at least thirty (30) days of such combined operations, no later
than the last to occur of (a) sixty (60) days following the end of the month in
which the Effective Time occurs and (b) ten (10) days following delivery of
such financial information with respect to the operations previously owned by
F&M and the Bank as FFB considers reasonably necessary to prepare the combined
financial results described in this Section.FFB.
13. CONDITIONS PRECEDENT; TERMINATIONSPRECIDENT; TERMINATIONS.
13.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The
obligations of each of the parties hereto to effect the Merger is subject to
the fulfillment on or prior to the Effective Timeeffective time of the Merger of the
following conditions precedent:
13.1.1 The Merger shallwill have been approved by the FRB or the
entity to which the FRB has delegated authority to grant such approvals,delegate, and by any other governmental authority having jurisdiction and any
applicable waiting period shallwill have expired, with no such approval or
authorization containing any provision which would be materially adverse to the
merged businesses of F&MHFC and FFB as contemplated by this Agreement.
13.1.2 No suit, action, investigation by any governmental
body, or other legal or administrative proceedings shallwill have been brought or
threatened which materially questions the validity or legality of the
transactions contemplated herein. For the purposes hereof, inquiries which
could give rise to any such suit, investigation or proceeding given by any
governmental agency may, at the option of either party, be deemed such a
threat.
13.1.3 The parties hereto shallwill have obtained any and all
consents required for the consummation of the Merger or for the preventing of
any default under any contract, agreement or permit of the parties hereto,
which, if not obtained or made, is reasonably likely to have, individually or
in the aggregate, a material adverse effect on the combined business affairs of
F&MHFC and FFB.
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13.2 CONDITIONS PRECEDENT TO FFB'S OBLIGATIONS. The obligation of
FFB to effect the Merger will be subject to the following conditions (which may
be waived in writing by FFB):
13.2.1 The representations and warranties of F&MHFC herein
contained will be true as of and at the Effective Timeeffective time of the Merger with the
same effect as though made at such time; F&MHFC will have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time;effective time of the Merger; and
F&MHFC will have delivered to FFB a certificate, dated the effective date of the
Merger and signed by its president or one of its vice presidents and its
secretary or one of its assistant secretaries, to both such effects.
13.2.2 Except as set forth in the Disclosure Statement, noNo material change in or event affecting the corporate status,
businesses, operations or condition (financial or otherwise) of either of F&MHFC
or the Bank will have occurred since April 30,December 31, 1995, (whether or not covered - 20 -
135
by
insurance), other than changes in the ordinary coursenone of business and
changes permitted by Section 11, which have nothas been in the aggregate, materially adverse in relation to F&M.HFC, taken
as a whole, and no other event or condition of any character will have occurred
or arisen since that date which will have materially and adversely affected the
corporate status, businesses, operations or financial condition of HFC.
13.2.3 FFB will have received from Ice Miller DonadioWerner & Ryan,Blank Co.,
L.P.A., counsel for F&M,HFC, a favorable opinion, dated immediately prior to the
Effective Time,effective time of the Merger, in form and substance reasonably satisfactory to FFB's
counsel.counsel and substantially in the form of the attached Exhibit B. In rendering
this opinion, such counsel may rely on certificates of public officials and of
corporate officers, opinions of recognized local counsel in jurisdictions where
such counsel is not qualified to practice, and such other evidence as ithe may
deem appropriate. The provisions of the preceding sentence are applicable to
all other opinions of counsel to be delivered hereunder.
13.2.4 A Registration Statement on Form S-4 under the 1933
Act will have become effective relating to the shares of FFB which the
shareholders of F&MHFC will receive at the Effective Time.effective time of the Merger.
13.2.5 FFB will have received ana favorable ruling from the
Internal Revenue Service, or opinion of counsel, in form and substance
satisfactory to FFB and its counsel, to the effect that, under the Internal Revenue
Code of 1986, as amended (the "IRC"),IRC, and
particularly Section 368(a)(1)(A)
thereof,, no gain or loss will be recognized to FFB or
its shareholders or to F&MHFC or its shareholders as a result of the Merger except
for gain (but not loss) on cash received by the shareholders of F&M.HFC.
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13.2.6 FFB will have received such written consents and
confirmations (or opinions of its counsel to the effect that such consents or
confirmations are not required), as itthey may reasonably request to the effect
that the Surviving Corporation will succeed upon consummation of the Merger to
all of F&M'sHFC's right, title and interest in and to its material contracts,
agreements, leases and other commitments and that the Surviving Corporation
will possess and enjoy all material licenses, permits and other governmental
authorizations possessed by F&MHFC at the date hereof. FFB will have received
those approvals and consents described in Section 10.12 hereof.
13.2.7 At the date of signing this Agreement and immediately
prior to the Effective Time,effective time of the Merger, FFB shallwill receive from FFB's
independent accountants letters to the effect that they are not aware of any
reason that FFB is not in compliance with the pooling of interests criteria as
specified under APB No. 16, and that, accordingly, the Merger can be accounted
for as a pooling of interests from FFB's perspective.
13.2.8 FFB shallwill have had performed and reviewed the results of
asuch Phase I Environmental Site Assessment of the real estate owned or leased by F&MSurvey and is satisfied with the results thereof and
has determined that no further testing is required and no remedial action is
necessary, or if the results of
such Assessment arePhase I is not satisfactory in form and substance to FFB,it,
FFB and F&M
shallHFC will have reached a reasonable agreement as to the remedial actions necessary to
correct any unsatisfactory conditions and the payment for such remedial
actions.
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13.3 CONDITIONS PRECEDENT TO F&M'SHFC'S OBLIGATION. The obligation of
F&MHFC to effect the Merger will be subject to the following conditions (which may
be waived in writing by F&M)HFC):
13.3.1 The representations and warranties of FFB herein
contained will be true as of and at the Effective Timeeffective time of the Merger with the
same effect as though made at such time; FFB will have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time;effective time of the Merger; and
FFB will have delivered to F&MHFC a certificate, dated the effective date of the
Merger and signed by its president or one of its vice presidents and its
secretary or one of its assistant secretaries, to both such effects.
13.3.2 No material change in the corporate status,
businesses, operations or condition (financial or otherwise) of FFB and its
consolidated Subsidiaries will have occurred since December 31, 19941995 (whether
or not covered by insurance), none of which has been materially adverse in
relation to FFB and its consolidated Subsidiaries, taken as a whole, and no
other event or condition of any character will have occurred or arisen since
that date which will have materially and adversely affected the corporate
status, businesses, operations or financial condition of FFB and its
consolidated Subsidiaries, taken as a whole.
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13.3.3 F&MHFC will have received from Frost & Jacobs, counsel
for FFB, a favorable opinion, dated immediately prior to the Effective Time,effective time of
Merger, in form and substance reasonably satisfactory to F&M's counsel.HFC's counsel and substantially
in the form of the attached Exhibit C. In rendering this opinion, such counsel
may rely on certificates of public officials and of corporate officers,
opinions of recognized local counsel in jurisdictions where such counsel is not
qualified to practice, and such other evidence as he may deem appropriate. The
provisions of the preceding sentence are applicable to all other opinions of
counsel to be delivered hereunder.
13.3.4 A Registration Statement on Form S-4 under the 1933
Act will have become effective relating to the shares of FFB common stock which
the shareholders of F&MHFC will receive at the Effective Time.effective time of the Merger.
13.3.5 F&MHFC will have received an opiniona favorable ruling from Professional Bank
Services, Inc. as independent investment advisor satisfactory to it as to the
fairness of the proposed transaction with FFB, from a financial point of view,
to F&M's shareholders.
13.3.6 F&M will have received anInternal Revenue Service, or opinion of counsel, in form and substance
satisfactory to F&M,HFC, to the effect that, under the IRCInternal Revenue Code of
1986, as amended (i) no gain or loss will be recognized to F&MHFC as a result of
the Merger, and (ii) no gain or loss (except in respect of fractional share
interests sold)sold or dissenter's receiving cash) will be recognized to F&M'sHFC's
shareholders as a result of their exchange of F&M Sharescommon stock of HFC for common
stock of FFB, and covering such other matters as are typically covered by such
opinion.
13.3.713.3.6 At the date of signing this Agreement and immediately
prior to the Effective Time, F&M shalleffective time of the Merger, HFC will receive from F&M'sHFC's
independent accountants a
letterletters to the effect
- 22 -
137 that they are not aware of any
reason that F&MHFC is not in compliance with the pooling of interests criteria as
specified under APB No. 16, and that, accordingly, the Merger can be accounted
for as a pooling of interests from F&M'sHFC's perspective.
13.3.8 At a special meeting of shareholders of F&M called for the
purpose of considering the Merger, the Merger will have been approved by an
affirmative vote of the holders of at least seventy-five percent of the F&M
Shares entitled to be voted in person or by proxy at such meeting.
13.4 TERMINATION AND ABANDONMENT. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and abandoned at
any time before the Effective Time,effective time of the Merger, whether before or after
adoption or approval of this Agreement by the shareholders of F&M,HFC, under any
one or more of the following circumstances:
13.4.1 By the mutual consent of the Boards of Directors of
FFB and F&M;HFC;
13.4.2 By FFB if the holders of 10.0%2.0% or more of the
F&M Shares
outstanding immediately prior to the Effective Timeshares of common stock of HFC will be entitled to receive cash in
exchange for their F&MHFC shares pursuant to perfected dissenters' rights under
the IndianaMichigan Business Corporation Law;Act;
13.4.3 By FFB if, prior to the Effective Time,effective time of the Merger,
the conditions set forth in Sections 13.2.1 through 13.2.8, inclusive, will not
have been met;
13.4.4 By F&MHFC if, prior to the Effective Time,effective time of the Merger,
the conditions set forth in Sections 13.3.1 through 13.3.8,13.3.6, inclusive, will not
have been met;
23
138
13.4.5 By either FFB or F&MHFC if prior to the Effective Time,effective time of
the Merger, the conditions set forth in Sections 13.1.1 through 13.1.3,
inclusive, shallwill not have been met, or any action or proceeding before any court
or other governmental body or agency will have been instituted or threatened to
restrain or prohibit the Merger and such constituent corporation deems it
unadvisable to proceed with the Merger;
13.4.6 By either FFB or F&MHFC if the requisite approval of the
shareholders of F&MHFC will not have been obtained or if the Effective Time shalleffective time of the
Merger will not have occurred on or before April 1, 1996;30, 1997; or
13.4.7 By FFB if the Average Price is less than $28.48average of the bid and ask price of FFB
shares for the twenty day period associated with the Exchange Ratio as set
forth in Section 6.3.1 falls below $27.625 per share or by F&MHFC if the Average Price is greater than $38.53average
of the bid and ask price of FFB shares for the twenty day period associated
with the Exchange Ratio as set forth in Section 6.3.1 exceeds $37.375 per share
(in either case, as may be adjusted by the declaration of a stock dividend,
stock split or other such recapitalization).
13.5 EFFECT OF TERMINATION. Upon any such termination and
abandonment, of this
Agreement under any one or more of the circumstances described in Section 13.4, neither party will have any liability or obligation hereunder to
the other, except for the return of all documents - 23 -
138
exchanged and the
preservation of the confidentiality by each party of the information exchanged. In the event that FFB or F&M declines to effect the
Merger notwithstanding the performance of all conditions precedent to the
obligation of FFB or F&M, as the case may be, to effect the Merger, the
non-breaching party shall be entitled to recover from the breaching party all
its expenses, including reasonable attorney's fees and fees of other
professionals, incurred in connection with the Merger, and shall be entitled to
such other remedies against the defaulting party as may exist at law or in
equity.
13.6 EXPENSES. Upon a termination of this Agreement as provided in
Section 13.4, each party will pay all costs and expenses of its performance of
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with, including fees, expenses and disbursements of
its accountants and counsel.
13.7 CLOSING. Subject to the satisfaction of the conditions
precedent specified in Section 13.1 through 13.3 hereof and of the terms set
forth herein, the consummation of the transactions contemplated by this
Agreement, the Agreement of Merger and the Articles of Merger (the "Closing")
shall take place at a place and time satisfactory to the parties on the last
day of the month within which occurs the later of the date on which the
approvals specified in Section 12.4 have become effective and the date upon
which the shareholder approval specified in Section 13.3.8 has been obtained
(or at such other place or on such other date and time as the parties may
agree)(the "Closing Date"). At the Closing, such documents as are contemplated
by 13.2 and 13.3 to be delivered at Closing shall be delivered, including the
certificates specified in Sections 13.2.1 and 13.3.1, and the parties shall
execute and cause to be filed in the appropriate offices the Articles of
Merger, Agreement of Merger, and such other documents as may be deemed
necessary or advisable in the opinion of FFB to effectuate the Merger as
promptly as practicable.
14. GENERAL PROVISIONS.
14.1 DEFINITIONS. "Subsidiaries" as used herein means any
corporation 50% or more of whose outstanding voting securities are owned
directly or indirectly by FFB or F&M,HFC, as the context may require, whether
consolidated or unconsolidated. The headings in this Agreement will not affect
in any way its meaning or interpretation.
14.2 AMENDMENTS. Any of the terms or conditions of this Agreement
may be modified or waived at any time before the Effective Timeeffective time of the Merger
by the party which is, or the shareholders of which are, entitled to the
benefit thereof upon the authority of the Board of Directors of such party.party,
provided that any such modification or waiver will in the judgment of the party
making it not affect substantially or materially and adversely the benefits to
such party or its shareholders intended under this Agreement.
24
139
14.3 NOTICES. All notices, demands, requests, consents or
approvals required hereunder will be in writing and will be given (and shallwill be
deemed to have been duly given upon receipt) by delivery in person or by
certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or to such other address
as any party may give to the other by like notice:
- 24 -
139
If toIF TO FFB: First Financial Bancorp.
300 High Street
P.O. Box 476
Hamilton, Ohio 45012-0476
ATTENTION: Stanley N. Pontius, President
and Chief Executive Officer
With copies to: Frost & Jacobs
2500 PNC Center
201 East Fifth Street
P.O. Box 5715
Cincinnati, Ohio 45201-5715
ATTENTION: Neil Ganulin
If to F&M: F & M Bancorp
729-31 MainIF TO HFC: Hastings Financial Corporation
241 W. State Street
P.O. Box 567
Rochester, Indiana 46975-0567Hastings, Michigan 49058
ATTENTION: WilliamLarry J. Gordon, PresidentKornstadt
With copies to: Ice Miller DonadioWerner & Ryan
One American Square, Box 82001
Indianapolis, Indiana 46282Blank Co., L.P.A.
7205 West Central Avenue
Toledo, Ohio 43617
ATTENTION: Thomas H. RistineC. Blank
14.4 BINDING NATURE OF AGREEMENT. This Agreement will be binding
upon and inure to the benefit of FFB and F&MHFC and their respective successors
and permitted assigns.
14.5 ASSIGNMENT. Neither this Agreement nor any obligation or
right hereunder may be assigned by any party hereto, whether directly or
indirectly, without the prior written consent of the other party.
14.6 GOVERNING LAW. This Agreement will in all respects be
governed and construed in accordance with the laws of the State of Indiana.Ohio, except
to the extent superseded by the federal banking laws of the United States.
25
140
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
- 25 -
140
14.8 TERMINATION OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants in this Agreement or in any closing
certificate delivered pursuant to this Agreement shall expire with, and be
terminated and extinguished at, the Effective Time; provided, however, that the
covenants of FFB contained in Sections 12.5, 12.8, 12.14 and 12.15 hereof shall
survive the Effective Time and may be enforced by any person entitled to the
benefits thereof.
IN WITNESS WHEREOF, pursuant to authority duly given by its Board of
Directors, each of FFB, and F&MHFC has caused this Agreement to be executed and
attested by its authorized officers as of the date and year first above
written.
FIRST FINANCIAL BANCORP.
ATTEST:
By: /s//s/ Stanley N. Pontius
---------------------------
/s/ Richard E. WeinmanMichael R. O'Dell -----------------------------------
- --------------------------------- Print Name: Stanley N. Pontius
- ----------------------
Richard E. Weinman
Secretary --------------------------
Title: President/CEO
F & M BANCORP------------------------------
HASTINGS FINANCIAL CORPORATION
ATTEST:
By:/s/ Larry J. Kornstadt
/s/ George R. Hoover By:David C. Wren ----------------------------------
- --------------------------------- Larry J. Kornstadt
Secretary President
/s/William Larry J. Gordon
- --------------------------- ------------------------------
George R. Hoover, Secretary WilliamKornstadt
-------------------------------------
Larry J. Gordon, President
-Kornstadt,
as to Section 12.11
26 -
141
FIRST AMENDMENTEXHIBIT A
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY Date Received
________________________
________________________
________________________
- --------------------------------------------------------------------------------
CERTIFICATE OF MERGER/CONSOLIDATION
For use by Domestic or Foreign Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), and/or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporations execute the following Certificate:
1. The Plan of Merger (Consolidation) is as follows:
a. The name of each constituent corporation and its corporation
identification number (CID) is:
________________________________________________________________________________
________________________________________________________________________________
b. The name of the surviving (new) corporation and its corporation
identification number (CID) is:
________________________________________________________________________________
c. For each constituent stock corporation, state:
Designation and
number of outstanding Indicate class or Indicate class or
shares in each class series of shares series entitled
Name of corporation or series entitled to vote to vote as a class
___________________ ____________________ _________________ __________________
___________________ ____________________ _________________ __________________
___________________ ____________________ _________________ __________________
___________________ ____________________ _________________ __________________
___________________ ____________________ _________________ __________________
If the number of shares is subject to change prior to the effective date of the
merger or consolidation, the manner in which the change may occur is as follows:
142
d. For each constituent nonstock corporation
(i) If it is organized on a membership basis, state (a) the name
of the corporation, (b) a description of its members, and (c)
the number, classification and voting rights of its members.
(ii) If it is organized on a directorship basis, state (a) the name
of the corporation, (b) a description of the organization of
its board, and (c) the number, classification and voting
rights of its directors.
e. The terms and conditions of the proposed merger (consolidation),
including the manner and basis of converting the shares of , or
membership or other interests in, each constituent corporation into
shares, bonds, or other securities of, or membership or other interest
in, the surviving (consolidated) corporation, or into cash or other
consideration, are as follows:
f. If a consolidation, the Articles of Incorporation of the consolidated
corporation are attached to this Certificate and are incorporated
herein. If a merger, the amendments to the Articles, or a restatement
of the Articles, of the surviving corporation to be effected by the
merger are as follows:
g. Other provisions with respect to the merger (consolidation) are as
follows:
THE PLAN OF MERGER WILL BE FURNISHED BY THE SURVIVING CORPORATION, ON
REQUEST AND WITHOUT COST, TO ANY SHAREHOLDER OF ANY CONSTITUENT
CORPORATION.
2. (Complete for any foreign corporation only)
This merger (consolidation) is permitted by the laws of the state of
____________________________, the jurisdiction under which _______
___________________________(name of foreign corporation) is organized
and the plan of merger (consolidation) was adopted and approved by
such corporation pursuant to and in accordance with the laws of
that jurisdiction.
143
3. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt of this
document in this office).
The merger (consolidation) shall be effective on the _______ day of
____________________, 19_____.
4. (Complete applicable section for each constituent corporation)
a. (For domestic profit corporations only)
The plan of merger was approved by the unanimous consent of the
incorporators of_____________________________________________________
________________________________which has not commenced business, has
not issued any shares, and has not elected a Board of Directors.
(Incorporators must sign on this page of the Certificate.)
b. (For profit corporations involved in a merger only)
The plan of merger was approved by the Board of Directors of
______________________________________________________________________
_________________________________, the surviving corporation, without
the approval of the shareholders of that corporation in accordance
with Section 701 of the Act.
c. (For profit corporations only)
The plan of merger was adopted by the Board of Directors of the
following constituent corporations:
and was approved by the shareholders of those corporations in
accordance with Section 703a.
d. (For nonprofit corporations only)
The plan of merger or consolidation was adopted by the Board of
Directors (i) Complete if organized upon a stock or membership basis)
of ___________________________________________________________________
and was approved by the shareholders or members of that corporation
in accordance with Sections 701 and 703(1) and (2), or pursuant to
Section 407 by written consent and written notice, if required.
(ii) (Complete if organized upon a directorship basis)
of ___________________________________________________________________
in accordance with Section 703(3).
SIGN THIS AREA FOR ITEM 4(a).
Signed this ________ day of ________________________________, 19_____.
____________________________________ ____________________________________
____________________________________ ____________________________________
144
Sign this area for items 4(b), 4(c), or 4(d).
Signed this ________ day of ________________________________________, 19_____.
_______________________________________________________________________________
(Name of Corporation)
By ____________________________________________________________________________
(Signature)
_______________________________________________________________________________
(Type or Print Name and Title)
Signed this ________ day of ________________________________________, 19_____.
_______________________________________________________________________________
(Name of Corporation)
By _____________________________________________________________________________
(Signature)
________________________________________________________________________________
(Type or Print Name and Title)
145
DOCUMENT WILL BE RETURNED TO NAME AND Name of person or organization
MAILING ADDRESS INDICATED IN THE BOX BELOW. remitting fees:
Include name, street and number (or P.O. box),
city, state and ZIP code. ______________________________
______________________________
Preparer's name and business
telephone number:
______________________________
(513) _________________________
INFORMATION AND INSTRUCTIONS
1. The merger/consolidation cannot be filed until this form, or a
comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm
copy will be prepared for the records of the Corporation and
Securities Bureau. The original copy will be returned to the address
appearing in the box above as evidence of filing.
Since this document must be microfilmed, it is important that the
filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This certificate is to be used pursuant to sections 701 through 707 of
the Act for the purpose of merging or consolidating two or more
domestic and/or foreign corporations and pursuant to Section 731 or
735 if the merger or consolidation involves one or more foreign
corporations.
4. If more than two corporations are merging or consolidating, the
certificate may be adjusted as necessary, or the format may be used as
a guide in drafting your own certificate. If additional space is
required for any section, continue the section on an attachment.
5. Item 3 - This document is effective on the date approved and filed by
the Bureau. A later effective date, no more than 90 days after the
date of delivery, may be stated.
6. A domestic nonprofit charitable purpose corporation must obtain the
consent of the Michigan Attorney General if it is merging or
consolidating into a for profit corporation or a foreign nonprofit
corporation that does not have a certificate of authority with
Michigan. Contact the Charitable Trust Division, Michigan Attorney
General, Room 670, Law Building, 525 West Ottawa, Lansing, Michigan
48913 at least 45 days before the desired effective date of the merger
or consolidation.
7. This certificate must be signed in ink by the president,
vice-president, chairperson, or vice-chairperson of each corporation
that is merging or consolidating, unless the incorporators of a
domestic profit corporation approve the merger or consolidation
pursuant to sections 706 and 707 of the Act. In that event, the
certificate must be signed in ink by the majority of the incorporators
if more than one of that corporation in item 4.
146
8. FEES: For each domestic corporation (Make remittance payable to the
State of Michigan. Include corporation name and CID Number on check
or money order)...............................................$50.00
Merger - If the survivor is a domestic profit corporation whose
authorized shares are increased: each additional 20,000 authorized
shares........................................................$30.00
Consolidation - Franchise fees are required for the articles of
incorporation of the new consolidated corporation, if it is a domestic
corporation.
Credit - If a foreign corporation authorized to transact business in
this State merges or consolidates into a domestic profit corporation,
the amount of franchise fees required to be paid by that domestic
corporation shall be reduced by the initial or additional franchise
fees paid to this State by the foreign corporation.
9. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities
Bureau, Corporation Division, P.O. Box 30054, 6546 Mercantile
Way, Lansing, MI 48909, Telephone: (517) 334-6302
147
EXHIBIT B (Opinion of HFC Counsel)
---------
___________________________, 1996
First Financial Bancorp.
300 High Street
P.O. Box 476
Hamilton, Ohio 45012-0476
Ladies and Gentlemen:
This opinion is provided to you on behalf of HASTINGS FINANCIAL
CORPORATION ("HFC") in connection with the consummation of a Plan and Agreement
of Merger (the "Agreement") between HFC and First Financial Bancorp. ("First
Financial"), dated ____________, 1996 pursuant to which HFC will be merged into
First Financial (the "Merger") effective as of ____________, 19__ at 12:01 a.m.
("Effective Time of the Merger"). This opinion is given to you pursuant to
Section 13.2.3 of the Agreement. Capitalized terms defined in the Agreement
and not otherwise defined herein shall have the meanings given those terms in
the Agreement.
As to various questions of fact material to our opinion, we have
relied upon the representations made in the Agreement and upon a certificate of
an officer of HFC (the "Officer's Certificate"). We have examined such
certificates of public officials, corporate documents and records and other
certificates, opinions and instruments and have made such other investigations
as we have deemed necessary in connection with the opinions hereinafter set
forth. In rendering the opinions set forth herein, we have assumed the
authenticity of all documents submitted to us as originals, the due execution
of and genuineness of the signatures on such documents, the legal capacity of
all signing parties to such documents and the conformity to original documents
of all photostatic copies of such documents submitted to us. In addition, with
regard to any opinions given with regard to the laws of the State of Michigan,
we have relied solely upon the opinion of _________.
The opinions hereinafter expressed are limited to the laws of the
States of Michigan and Ohio and are subject to the following additional
qualifications:
B-1
148
First Financial Bancorp.
__________________, 1996
Page 2
(i) The enforceability of any provisions in the Agreement, or any
rights granted to you pursuant to the Agreement, is subject to and may be
affected by applicable state and/or federal bankruptcy, insolvency,
reorganization, moratorium laws, or similar laws affecting the rights of
creditors or debtors generally, and the application of general principles of
equity and matters of public policy (whether considered in a proceeding at law
or in equity) including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing.
(ii) Any provisions requiring payment of attorney's fees and
litigation expenses may not be enforceable.
(iii) No opinion is expressed as to the enforceability of (a)
self-help provisions, (b) waiver of constitutional rights, (c) provisions
related to waiver of remedies (or the delay or omission of enforcement
thereof), disclaimers, liability limitations with respect to third parties,
liquidated damages or the creation of remedies not available under Michigan or
Ohio law or (d) provisions pursuant to which HFC attempts to exempt itself from
liability for its own negligence, fault or actions or providing for
indemnification against criminal liability, civil penalties or punitive damages
or against actions to the extent that the indemnitee has been grossly negligent
or engaged in wilful misconduct.
As used herein, the phrase "to the best of our knowledge" means we
have relied, without any independent investigation or inquiry, solely upon (i)
the Officer's Certificate and (ii) the actual knowledge, if any, of a limited
number of attorneys in this firm who regularly perform legal services for HFC
obtained in the scope of such representation.
Based upon and subject to the foregoing, we are of the opinion that:
1. HFC is a corporation duly organized and validly existing under
the laws of the State of Michigan and is registered as a bank holding company
under the Banking Holding Company Act of 1956, as amended. HFC has the
corporate power to carry on its businesses as they are now being conducted.
2. HFC's capitalization consists of 400,000 authorized shares of
common stock (par value $1.00 per share), of which, as of the Effective Time of
the Merger, 80,463 shares were issued and outstanding. Each issued share was
validly issued, fully paid and non-assessable. To the best of our knowledge,
there are no outstanding subscriptions, options, warrants, calls or rights of
any kind relating to or providing for the issuance, sale, delivery or transfer
of any class of securities of HFC.
B-2
149
First Financial Bancorp.
__________________, 1996
Page 3
3. National Bank of Hastings ("Bank") is a wholly owned
subsidiary of HFC. HFC has no other subsidiaries. Bank is a national bank
duly organized and validly existing under the laws of the United States. Bank
has the corporate power to carry on its businesses as they are now being
conducted and is qualified to do business in each jurisdiction in which the
character and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification. All of the outstanding shares of
stock of Bank are validly issued, fully paid and non-assessable, except as
provided by federal law, and all such shares are owned by HFC free and clear of
all liens, claims, charges or encumbrances. To the best of our knowledge,
there are no outstanding subscriptions, options, warrants, calls or rights of
any kind relating to or providing for the issuance, sale, delivery or transfer
of any class of securities of Bank.
4. The execution and performance of the Agreement and the
consummation of the transactions contemplated thereby will not: (i) violate,
or conflict with, or require any consent under, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien upon any of the assets of either of HFC or Bank, under any of the terms,
conditions or provisions of the Articles of Incorporation or By-Laws of HFC,
the Articles of Association or By-Laws of Bank, or of any note, bond, mortgage,
indenture, deed of trust, material license, lease, agreement or other
instrument or obligation of which we have knowledge and to which either of HFC
or Bank is a party or by which either of HFC or Bank or any of their assets may
be bound or affected or (ii) to the best of our knowledge, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to HFC, Bank
or any of their assets.
5. All corporate action by HFC required in order to authorize the
Merger, and the execution and delivery of all documents related thereto, and
the performance of all actions contemplated thereby has been taken. This
Agreement has been duly executed and delivered by HFC and is a valid and
binding obligation of HFC in accordance with its terms.
6. Except as set forth in the Disclosure Schedule, to the best of
our knowledge, there are no material suits, actions or legal or administrative
proceedings pending or threatened against HFC or Bank, which, if adversely
determined, might materially and adversely affect the financial condition, on a
consolidated basis, of HFC and Bank or the conduct of their businesses, nor is
there any decree, injunction, or order of any court, governmental department or
agency outstanding against HFC or Bank having any such effect.
B-3
150
First Financial Bancorp.
__________________, 1996
Page 4
This opinion is given for the sole use and benefit of First Financial
and no party or entity other than First Financial is entitled to rely on this
opinion. This opinion is based upon facts and law in existence on the date
hereof, and we disclaim any undertaking to advise you of changes occurring
therein after the date hereof.
Very truly yours,
B-4
151
EXHIBIT C (Opinion of First Financial's Counsel)
---------
(513) 651-6800
____________________________, 1996
Hastings Financial Corporation
241 W. State Street
Hastings, Michigan 49058
ATTENTION: Larry J. Kornstadt
Ladies and Gentlemen:
This opinion is provided to you on behalf of First Financial Bancorp.
("First Financial") in connection with the consummation of a Plan and
Agreement of Merger (the "Agreement") among First Financial and Hastings
Financial Corporation ("HFC"), dated _____________, 1996 pursuant to which HFC
will be merged into First Financial (the "Merger") effective as of
______________, 19__ at 12:01 a.m. ("Effective Time of the Merger"). This
opinion is given to you pursuant to Section 13.3.3 of the Agreement.
Capitalized terms defined in the Agreement and not otherwise defined herein
shall have the meanings given those terms in the Agreement.
As to various questions of fact material to our opinion, we have
relied upon the representations made in the Agreement and upon a certificate of
an officer of First Financial (the "Officer's Certificate"). We have also
examined such certificates of public officials, corporate documents and records
and other certificates, opinions and instruments and have made such other
investigations as we have deemed necessary in connection with the opinions
hereinafter set forth. In rendering the opinions set forth herein, we have
assumed the authenticity of all documents submitted to us as originals, the due
execution of and genuineness of the signatures on such documents, the legal
capacity of all signing parties to such documents and the conformity to
original documents of all photostatic copies of such documents submitted to us.
The opinions hereinafter expressed are limited to the laws of the
State of Ohio and are subject to the following additional qualifications:
(i) The enforceability of any provisions in the Agreement, or any
rights granted to you pursuant to the Agreement, is subject to and may be
affected by applicable state and/or federal bankruptcy, insolvency,
reorganization, moratorium laws, or similar laws affecting the rights of
creditors or debtors generally, and the application of general principles of
equity and matters of public policy (whether considered in a proceeding at law
or in equity) including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing.
C-1
152
Hastings Financial Corporation
_____________________, 1996
Page 2
(ii) Any provisions requiring payment of attorney's fees and
litigation expenses may not be enforceable.
(iii) No opinion is expressed as to the enforceability of (a)
self-help provisions, (b) waiver of constitutional rights, (c) provisions
related to waiver of remedies (or the delay or omission of enforcement
thereof), disclaimers, liability limitations with respect to third parties,
liquidated damages or the creation of remedies not available under Ohio and
Michigan law or (d) provisions pursuant to which HFC attempts to exempt itself
from liability for its own negligence, fault or actions or providing for
indemnification against criminal liability, civil penalties or punitive damages
or against actions to the extent that the indemnitee has been grossly negligent
or engaged in wilful misconduct.
As used herein, the phrase "to the best of our knowledge" means we
have relied, without any independent investigation or inquiry, solely upon (i)
the Officer's Certificate and (ii) the actual knowledge, if any, of a limited
number of attorneys in this firm who regularly perform legal services for First
Financial obtained in the scope of such representation.
Based upon and subject to the foregoing, we are of the opinion that:
1. First Financial is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended and a savings and loan holding company under the Savings and
Loan Holding Company Act. First Financial has the corporate power to carry on
its businesses as they are now being conducted.
2. First Financial's capitalization consists of 25,000,000
authorized shares of common stock (par value $8.00 per share), of which, as of
the Effective Time of the Merger, __________ shares were issued and
outstanding.
3. The issuance of the shares of common stock of First Financial
to HFC shareholders in exchange for their HFC common stock in connection with
the Merger has been duly and validly authorized and, immediately after the
Effective Time of the Merger, and, upon First Financial's receipt of the
consideration provided in the Agreement and due issuance of the shares by
First Financial's registrar, such shares will be duly issued, fully paid and
non-assessable. No shareholder of First Financial has any pre-emptive right of
subscription or purchase pursuant to First Financial's Articles of
Incorporation with respect to the shares of common stock of First Financial to
be issued to HFC shareholders in connection with the Merger.
C-2
153
Hastings Financial Corporation
_____________________, 1996
Page 3
4. The execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated thereby will not: (i)
violate, or conflict with, or require any consent under, or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien upon any of the assets of First Financial, under the
Articles of Incorporation or Regulations of First Financial, or of any note,
bond, mortgage, indenture, deed of trust, material license, lease, agreement or
other instrument or obligation of which we have knowledge and to which First
Financial is a party or by which First Financial or any of its assets may be
bound or affected or (ii) to the best of our knowledge, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to First
Financial or any of its assets.
5. All corporate action by First Financial required in order to
authorize the Merger, and the execution and delivery of all documents related
thereto, and the performance of all actions contemplated thereby has been
taken. The Agreement has been duly executed and delivered by First Financial
and is the valid and binding obligation of First Financial in accordance with
its terms.
6. To the best of our knowledge, there is no material litigation,
proceeding, arbitration, governmental investigation or labor dispute pending or
overtly threatened against First Financial or any of its consolidated
Subsidiaries or its or their properties or businesses, other than litigation
disclosed by First Financial in its annual and quarterly reports filed with the
Securities and Exchange Commission ("SEC").
This opinion is given for the use and benefit of HFC and no party or
entity other than HFC is entitled to rely on this opinion. This opinion is
based upon facts and law in existence on the date hereof, and we disclaim any
undertaking to advise you of changes occurring therein after the date hereof.
Very truly yours,
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154
APPENDIX A
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
F & M BANCORP
THIS FIRST AMENDMENT of Plan and Agreement of Merger between First
Financial Bancorp. and F & M Bancorp (hereafter called "this Amendment") dated
as of December 15, 1995, by and between First Financial Bancorp. ("FFB") and
F & M Bancorp ("F&M"),
W I T N E S S E T H :
WHEREAS, FFB and F&M entered into a Plan and Agreement of Merger dated
September 11, 1995 (the "Agreement"), and
WHEREAS, FFB and F&M now desire to amend the Agreement, as
hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
Section 1. Amendment of Agreement. Section 11.2 of the Agreement
is hereby amended to read as follows:
11.2. Dividends. From and after the date of this Agreement and
prior to the Effective Time, neither FFB nor F&M will declare
or pay any dividends on or make any distributions in respect
of any shares of its capital stock, except that (i) FFB may
declare and pay, on or about the dates when such dividends
have customarily been declared and paid by it in the past,
quarterly cash dividends in the amount of $0.26 or more (plus
such additional amount, which may be stock dividends, if any,
consistent with FFB's practices during recent years as its
Board of Directors may determine) per share during each
calendar quarter on the outstanding shares of FFB's common
stock; and (ii) F&M may declare and pay cash dividends in an
amount not to exceed the greater of (A) thirty percent (30%)
of F&M's net earnings as determined by F&M for the year ending
December 31, 1995, or (B) $198,000. For the period from
December 31, 1995 until the Effective Time, and assuming the
financial condition of F&M justifies such action, the parties
agree to cooperate with each other to ensure that the
shareholders of F&M receive a quarterly cash dividend from
either F&M or FFB and that during the quarter in which the
Effective Time occurs such shareholders of F&M do not receive
cash dividends from both F&M and FFB.HASTINGS FINANCIAL CORPORATION
142
Section 2. Agreement Otherwise Unaffected. Except as set forth
in Section 1 of this Amendment, the Agreement is not affected by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, pursuant to authority duly given by its Board of
Directors, each of FFB and F&M has caused this Agreement to be executed and
attested by its authorized officers as of the date and year first above written.
FIRST FINANCIAL BANCORP.
By:_________________________________
Stanley N. Pontius, President/CEO
Attest:
_____________________________
Richard G. Weinman, Secretary
F & M BANCORP
By:________________________________
William J. Gordon, President
Attest:
______________________________
George R. Hoover, Secretary
-2-
143155
APPENDIX B
FORM OF OPINION OF PROFESSIONAL BANK SERVICESAUSTIN ASSOCIATES, INC.
TO BE ISSUED ON CONSUMMATION OF MERGER
Professional Bank Services
The 1000 Building
6200 Dutchman's Lane, Suite 305
Louisville, Kentucky 40205
________________,(TO BE RETYPED ON AAI LETTERHEAD AND
DATED AS OF THE DATE OF PROXY MATERIALS)
DRAFT
-----
___________________, 1996
Board of Directors
F & M Bancorp
729 MainHastings Financial Corporation
241 West State Street
Rochester, Indiana 46975
DearHastings, Michigan 49058
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a financial perspective,point of
view, to the commonHastings Financial Corporation ("HFC") and its shareholders of F & M Bancorp, Rochester,
Indiana (the "Company")the
terms of the proposed merger of the Company with First
Financial Bancorp, Hamilton, Ohio ("FFB"). In the proposed merger, Company
shareholders will receive FFB common shares equal to the quotient of $12,500,000
and the average of the closing prices for FFB Shares on the National Association
of Securities Dealers Automated Quotations System - National Market System
("NASDAQ") for each of the twenty consecutive trading days ending on the second
trading day prior to the Effective Time as defined by the Plan and Agreement of Merger dated July 2, 1996 ("Agreement")
between FFBHFC and the Company (the "Agreement"First Financial Bancorp. ("First"). Professional Bank Services, Inc.The Agreement provides for
the merger of HFC with and into First.
The terms of the Agreement provide for aggregate consideration to be received by
all HFC shareholders equal to $10,000,000 ("PBS"Merger Price") is a bank consulting firm, subject to an
increase or decrease for the net retained earnings of HFC after January 1, 1997,
through closing. Each outstanding share of HFC common stock will receive an
amount equal to the Merger Price divided by the average price of First shares,
determined in accordance with the Agreement, and divided by the total number of
shares of HFC common stock outstanding (the "Exchange Rate"), subject to
adjustment, as part
of its investment banking business is continually engaged in reviewing the
fairness, from a financial perspective, of bank acquisition transactions andfully described in the valuation of banksAgreement. HFC and other businesses and their securities in connection
with mergers, acquisitions, estate settlements and other purposes. We are
independent with respectFirst each has the
right to abandon the parties of the proposed transaction.
For purposes of this opinion, PBSMerger under certain limited conditions.
In carrying out our engagement, we have reviewed and analyzed material bearing
upon the historicalfinancial and operating condition of HFC and First, including but not
limited to the following: (i) the Prospectus and Proxy Statement; (ii) the
financial statements of HFC and First for the period 1991 through June 30, 1996;
(iii) certain other publicly available information on HFC and First; (iv)
publicly available information regarding the performance of certain other
companies whose business activities were believed by us to be generally
comparable to those of HFC and First; (v) the Companyfinancial terms, to the extent
publicly available, of certain comparable transactions; and its wholly owned subsidiary Farmers & Merchants
Bank of Rochester, Rochester, Indiana ("the "Bank") contained in: (i) FRY-9SP(vi) such other
analysis and information as filed with the Federal Reserve as of June 30, 1995; (ii) June 30, 1995
Consolidated Reports of Condition and Income filed with the Federal Deposit
Insurance Corporation by the Bank; (iii) December 31, 1994 and March 31, 1995
Uniform Bank Performance Reportwe deemed relevant.
156
Page 2
Members of the Bank; (iv) historical common stock
trading activityBoard
______________, 1996
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the Company; and (v) the premisesfinancial and other fixed assets.information provided to us or publicly
available, and have not attempted to verify the same. We have reviewedmade no
independent verification as to the assets or properties of HFC or First, and
tabulated statistical data regardinghave instead relied upon representations and information of HFC and First, in
the loan portfolio,
securities portfolio and other performance ratios and statistics. Financial
projections were prepared and analyzed as well as other financial studies,
analyses and investigations as deemed relevant for the purposes of this opinion.aggregate. In review of the aforementioned information, we have taken into account our
assessment of general market and financial conditions, our experience in other
transactions, and our knowledge of the banking industry generally.
B-1
144
Board of Directors
F & M Bancorp
Page 2
In conjunction withrendering our opinion, we have evaluatedassumed that the historical performance
and current financial conditiontransaction
will be a tax-free reorganization with no material adverse tax consequences to
HFC or First, or to HFC shareholders receiving First stock. In addition, we have
assumed in the course of FFB contained in: (i) June 30, 1995 financial
information; (ii) audited financial statementsobtaining the necessary regulatory approvals for the
years ending December 31,
1991, 1992, 1993 and 1994; (iii) historical common stock trading and dividend
activity to date; (iv)transaction, no condition will be imposed that will have a material adverse
effect on the Agreement; and (v) the financial terms of certain
other comparable transactions. We have prepared and analyzed the pro forma
consolidated financial conditioncontemplated benefits of the Company,transaction to HFC and its
shareholders.
Based upon our analysis and subject to the Bank and FFB. We have
reviewed and tabulated consolidated statistical data regarding growth, growth
prospects for service markets, liquidity, asset composition and quality,
profitability, leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of the
Company, the Bank or FFB, nor havequalifications described herein, we
independently verified any of the
information reviewed; we have relied upon such information as being complete and
accurate in all material respects. We have not made independent evaluation of
the assets of the Company, the Bank or FFB.
Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers,believe that, as of the date hereof,of this letter, the consideration proposed
to be received by the shareholdersterms of the Company under the Agreement isare
fair,
and equitable from a financial perspective.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
Christopher L. Hargrove
Vice President
B-2point of view, to HFC and its shareholders.
For our services in rendering this opinion, HFC will pay us a fee and indemnify
us against certain liabilities, including liabilities under the securities laws.
We consent to the use of this opinion in the Prospectus and Proxy Statement
which is a part of First's Registration Statement on Form S-4 and to the
references to us under the heading "Experts" and elsewhere in the Prospectus and
Proxy Statement.
Austin Associates, Inc.
145157
APPENDIX C
CHAPTER 44MICHIGAN BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
Section. Section.
23-1-44-1. "Corporation" defined. 23-1-44-14. Transfer of shares restricted after demand
23-1-44-2. "Dissenter" defined. for payment.
23-1-44-3. "Fair value" defined. 23-1-44-15. Payment to dissenter.
23-1-44-4. "Interest" defined. 23-1-44-16. Return of shares and release of restrictions.
23-1-44-5. "Record shareholder" defined. 23-1-44-17. Offer of fair value for shares obtained after
23-1-44-6. "Beneficial shareholder" defined. first announcement.
23-1-44-7. "Shareholder" defined. 23-1-44-18. Dissenter demand for fair value under certain
23-1-44-8. Shareholder dissent. conditions.
23-1-44-9. Beneficial shareholder dissent. 23-1-44-19. Effect of failure to pay demand -
23-1-44-10. Notice of dissenters' rights Commencement of judicial appraisal
preceding shareholder vote. proceeding.
23-1-44-11. Notice of intent to dissent. 23-1-44-20. Judicial determination and assessment of
23-1-44-12. Notice of dissenter's rights costs.
following action creating rights.
23-1-44-13. Demand for payment by dissenter.
23-1-44-1. "CORPORATION" DEFINED. -450.1761 DEFINITIONS.
As used in this chapter, "corporation"sections 762 to 774:
(a) "Beneficial shareholder" means the person who is a beneficial owner
of shares held by a nominee as the record shareholder.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger or share exchange2 of that
issuer.
[P.L.149-1986, Section 28.]
23-1-44-2. "DISSENTER" DEFINED. - As used in this chapter, "dissenter"(c) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 8 [IC
23-1-44-8] of this chapter762 and who exercises that right when and in the
manner required by sections 10764 through 18 [IC 23-1-44-10 through IC 23-1-44-18] of this
chapter. [P.L.149-1986, Section 28.]
23-1-44-3. "FAIR VALUE" DEFINED.- As used in this chapter, "fair value,"772.
(d) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
[P.L. 149-1986, Section 28.]
23-1-44-4. "INTEREST" DEFINED. - As used in this chapter, "interest"(e) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
[P.L. 149-1986, Section 28.]
23-1-44-5. "RECORD SHAREHOLDER" DEFINED. - As used in this chapter, "record(f) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent that treatment
as a record shareholder is provided under a recognition procedure or a
disclosure procedure established under IC 23-1-30-4. [P.L.149-1986, Section 28.]
23-1-44-6. "BENEFICIAL SHAREHOLDER" DEFINED. - As used in this chapter,
"beneficial shareholder" meansof the person who is a beneficial owner of shares
heldrights granted by a nominee as the record shareholder. [P.L. 149-1986, Section 28.]
23-1-44-7. "SHAREHOLDER" DEFINED. - As used in this chapter, "shareholder"certificate on file with a
corporation.
(g) "Shareholder" means the record shareholder or the beneficial shareholder.
[P.L.149-1986, Section
28.]
23-1-44-8.45O.1762 RIGHT OF SHAREHOLDER DISSENT. - (a)TO DISSENT AND OBTAIN PAYMENT FOR
SHARES.
(1) A shareholder is entitled to dissent from, and obtain payment of
the fair value of the shareholder'shis or her shares in the event of, any of the following
corporate actions:
(1)C-1
158
(a) Consummation of a plan of merger to which the corporation
is a party if:
(A) Shareholderif shareholder approval is required for the merger by IC
23-1-40-3section 703a or
the articles of incorporation;incorporation and (B) Thethe shareholder is entitled to vote on the
merger.
(2)merger, or the corporation is a subsidiary that is merged with its parent under
section 711.
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
C-1
146
(3)(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution but not including a sale
pursuant to court order
ororder.
(d) An amendment of the articles giving rise to a sale for cashright to
dissent pursuant to section 621.
(e) A transaction giving rise to a plan by which all or
substantially all of the net proceeds of the sale will be
distributedright to the shareholders within one (1) year after the
date of sale.
(4) The approval of a control share acquisition under IC 23-1-42.
(5)dissent
pursuant to section 754.
(f) Any corporate action taken pursuant to a shareholder vote
to the extent the articles, of incorporation, bylaws, or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent and obtain payment for
their shares.
(b) This(g) The approval of a control share acquisition giving rise to
a right to dissent pursuant to section does799.
(2) Unless otherwise provided in the articles, bylaws, or a resolution
of the board, a shareholder may not applydissent from any of the following:
(a) Any corporate action set forth in subsection (1)(a) to the holders(e)
as to shares which are listed on a national securities exchange or held of
shares of any class or
series if,record by not less than 2,000 persons on the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the merger, plan of
share exchange, or sale or exchange of propertycorporate action is to be acted on,upon.
(b) A transaction described in subsection (l)(a) in which
shareholders receive cash or shares that satisfy the sharesrequirements of that classsubdivision
(a) or series were:
(1) Registered on a United States securities exchange registered
under the Exchange Act (as defined in IC 23-1-43-9); or
(2) Traded on the National Association of Securities Dealers, Inc.
Automated Quotations System Over-the-Counter Markets -
National Market Issues or a similar market.any combination thereof.
(c) A shareholder:
(1) Whotransaction described in subsection (I)(b) in which
shareholders receive cash or shares that satisfy the requirements of subdivision
(a) or any combination thereof.
C-2
159
(d) A transaction described in subsection (I)(c) which is
conducted pursuant to a plan of dissolution providing for distribution of
substantially all of the corporation's net assets to shareholders in accordance
with their respective interests within 1 year after the date of the transaction,
where the transaction is for cash or shares that satisfy the requirements of
subdivision (a) or any combination thereof.
(3) A shareholder entitled to dissent and obtain payment for the
shareholder'shis or her
shares under this chapter; or
(2) Who would be so entitledpursuant to dissent and obtain payment but for
the provisions of subsection (b);(l)(a) to (e) may not challenge the corporate
action creating (or that, buthis or her entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(4) A shareholder who exercises his or her right to dissent and seek
payment for his or her shares pursuant to subsection (l)(f) may not challenge
the provisions of
subsection (b), would have created)corporate action creating his or her entitlement unless the shareholder's
entitlement. [P.L.149-1986, Section 28; P.L.107-1987, Section
19.]
23-1-44-9.action is
unlawful or fraudulent with respect to the shareholder or the corporation.
450.1763 RIGHTS OF PARTIAL DISSENTER; ASSERTION OF DISSENTERS' RIGHTS BY
BENEFICIAL SHAREHOLDER DISSENT. - (a)SHAREHOLDER.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the
shareholder'shis or her name only if the shareholderhe or she dissents with
respect to all shares beneficially owned by any one (1)1 person and notifies the
corporation in writing of the name and address of each person on whose behalf the shareholderhe
or she asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which the shareholderhe or she dissents and
the
shareholder'shis or her other shares were registered in the names of different shareholders.
(b)(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the shareholder'shis or her behalf only if:
(1) The beneficial shareholderif all of the following apply:
(a) He or she submits to the corporation the record
shareholder'sshareholder s written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(2) The beneficial shareholderrights.
(b) He or she does so with respect to all the
beneficial shareholder's shares of which he
or those shares over whichshe is the beneficial shareholder or over which he or she has power to direct
the vote.
[P.L.149-1986, Section 28.]
23-1-44-10. NOTICEC-3
160
450.1764 CORPORATE ACTION CREATING DISSENTERS RIGHTS; VOTE OF
DISSENTERS' RIGHTS PRECEDING SHAREHOLDER VOTE. - (a)SHAREHOLDERS; NOTICE.
(1) If proposed corporate action creating dissenters' rights under
section 8 [IC
23-1-44-8] of this chapter762 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter.
(b)act and shall be accompanied by a copy of sections 761 to 774.
(2) If corporate action creating dissenters' rights under section 8 of this
chapter762
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 12 [IC
23-1-44-12] of this chapter. [P.L.149-1986, Section 28; P.L.107-1987,
Section 20.]
23-1-44-11.766. A shareholder who
consents to the corporate action is not entitled to assert dissenters/rights.
450.1765 NOTICE OF INTENT TO DISSENT. - (a)DEMAND PAYMENT FOR SHARES.
(1) If proposed corporate action creating dissenters' rights under
section 8 [IC 23-1-44-8] of this chapter762 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Mustrights must deliver to the corporation before the
vote is taken written notice of the shareholder'shis or her intent to demand payment for the shareholder'shis or
her shares if the proposed action is effectuated;effectuated and C-2
147
(2) Mustmust not vote the shareholder'shis or her
shares in favor of the proposed action.
(b)(2) A shareholder who does not satisfy the requirements of subsection
(a)(1) is not entitled to payment for the shareholder'shis or her shares under this chapter.
[P.L.149-1986, Section 28.]
23-1-44-12. NOTICE OF DISSENTERS' RIGHTS FOLLOWING ACTION CREATING RIGHTS. - (a)act.
450.1766 DISSENTER'S NOTICE; DELIVERY TO SHAREHOLDERS; CONTENTS.
(1) If proposed corporate action creating dissenters' rights under
section 8 [IC
23-1-44-8] of this chapter762 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of section 11 [IC 23-1-44-11] of this chapter.
(b)765.
(2) The dissenters' notice must be sent no later than ten (10) days after
approval by the shareholders, or if corporate action is taken without approval
by the shareholders, then ten (10)10 days after the
corporate action was taken.
The dissenters' notice must:
(1)taken, and must provide all of the following:
(a) State where the payment demand must be sent and where and
when certificates for certificated shares represented by certificates must be deposited;
(2)deposited.
(b) Inform holders of uncertificated shares without certificates to what
extent transfer of the shares will be restricted after the payment demand is
received;
(3)received.
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161
(c) Supply a form for demandingthe payment demand that includes the
date of the first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting dissenters'
rights certify whether he or not the
personshe acquired beneficial ownership of the shares
before that
date;
(4)the date.
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty (30)30 nor more than sixty (60)60 days after
the date the subsection (a)(1) notice is delivered; and
(5) Be accompanied by a copy of this chapter. [P.L.149-1986,
Section 28.]
23-1-44-13.delivered.
450.1767 DUTIES OF SHAREHOLDER SENT DISSENTER'S NOTICE; RETENTION OF RIGHTS;
FAILURE TO DEMAND FOR PAYMENT BY DISSENTER. - (a)OR DEPOSIT SHARE CERTIFICATES.
(1) A shareholder sent a dissenters'dissenter's notice described in IC 23-1-42-11 or in section 12 [IC 23-1-44-12]
of this chapter766
must demand payment, certify whether the shareholderhe or she acquired beneficial ownership of
the shares before the date required to be set forth in the dissenter'sdissenters' notice
underpursuant to section 12(b)(3) [IC 23-1-44-12(b)(3)] of this
chapter,766(2)(c), and deposit the shareholder'shis or her certificates in accordance
with the terms of the notice.
(b)(2) The shareholder who demands payment and deposits the shareholder's
shareshis or her share
certificates under subsection (a)(1) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c)(3) A shareholder who does not demand payment or deposit the shareholder'shis or her
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder'shis or her shares under this chapter and is considered, for purposes of this article, to have voted the
shareholder's shares in favor of the proposed corporate action. [P.L.149-1986,
Section 28.]
23-1-44-14.act.
450.1768 RESTRICTION ON TRANSFER OF SHARES RESTRICTED AFTER DEMAND FOR PAYMENT. - (a)WITHOUT CERTIFICATES;
RETENTION OF RIGHTS
(1) The corporation may restrict the transfer of uncertificated shares without
certificates from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under section
16 [IC 23-1-44-16] of this
chapter.
(b)770.
(2) The person for whom dissenters' rights are asserted as to uncertificated shares
without certificates retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
[P.L.149- 1986, Section 28.]
23-1-44-15.C-5
162
450.1769 PAYMENT BY CORPORATION TO DISSENTER. - (a)DISSENTER; ACCOMPANYING
DOCUMENTS.
(1) Except as provided in section 17 [IC
23-1-44-17] of this chapter, as soon as771, within 7 days after the proposed
corporate action is taken or if the transaction did not need shareholder approval and has been completed,
upon receipt of a payment demand is received, whichever occurs
later, the corporation shall pay each dissenter who complied with section 13 [IC 23-1-44-13] of this chapter767
the amount the corporation estimates to be the fair value of the dissenter's shares.
(b)his or her shares,
plus accounted interest.
(2) The payment must be accompanied by:
(1)by all of the following:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen (16)16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and if available the latest available interim financial statements, if any;
C-3
148
(2)statements.
(b) A statement of the corporation's estimate of the
fair value of the shares; and
(3)shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand
payment under section 18 [IC 23-1-44-18] of this chapter. [P.L.149-1986,
Section 28; P.L. 107-1987, Section 21.]
23-1-44-16.772.
450.1770 RETURN OF SHARESDEPOSITED CERTIFICATES AND RELEASE OF RESTRICTIONS. - (a)TRANSFER
RESTRICTIONS; EFFECT OF CORPORATION TAKING PROPOSED ACTION.
(1) If the corporation does not take the proposed action within sixty (60)60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b)shares without certificates
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters'dissenters notice under section 12 [IC 23-1-44-12] of this chapter766 and repeat the payment demand procedure.
[P.L.149-1986, Section 28.]
23-1-44-17.450.1771 ELECTION TO WITHHOLD PAYMENT FROM DISSENTER; OFFER OFTO
PAY ESTIMATED FAIR VALUE FOROF SHARES, OBTAINED AFTER FIRST ANNOUNCEMENT. -
(a)PLUS ACCRUED INTEREST;
STATEMENTS; EXPLANATION.
(1) A corporation may elect to withhold payment required by section 15 [IC
23-1-44-15] of this chapter769
from a dissenter unless the dissenterhe or she was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the first announcementpursuant to news media or to shareholders of
the terms of the proposed corporate action.
(b)section 766(2)(c).
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(2) To the extent the corporation elects to withhold payment under
subsection (a)(1), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall offer to pay this
amount to each dissenter who agreesshall agree to accept it in full satisfaction of
the dissenter'shis or her demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter'sdissenters right to demand payment under
section 18 [IC 23-1-44-18] of this chapter. [P.L.149-1986, Section 28.]
23-1-44-18. DISSENTER772.
450.1772 DEMAND FOR PAYMENT OF DISSENTER'S ESTIMATE OR REJECTION
OF CORPORATION'S OFFER AND DEMAND FOR PAYMENT OF FAIR VALUE UNDER CERTAIN CONDITIONS. - (a)AND
INTEREST DUE; WAIVER.
(1) A dissenter may notify the corporation in writing of the dissenter'shis or her own
estimate of the fair value of the dissenter'shis or her shares and amount of interest due, and
demand payment of the
dissenter'shis or her estimate, (lessless any payment under section 15 [IC 23-1-44-15] of this
chapter),769, or
reject the corporation's offer under section 17 [IC 23-1-44-17] of
this chapter771 and demand payment of the fair
value of his or her shares and interest due, if any 1 of the dissenter's shares, if:
(1)following applies:
(a) The dissenter believes that the amount paid under section 15
of this chapter769 or
offered under section 17 of this chapter771 is less than the fair value of his or her shares or
that the dissenter's shares;
(2)interest due is incorrectly calculated.
(b) The corporation fails to make payment under section 15 of this
chapter769 within sixty (60)60
days after the date set for demanding payment; or
(3)payment.
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares without certificates within sixty (60)60 days after the date set for
demanding payment.
(b)(2) A dissenter waives thehis or her right to demand payment under this
section unless the dissenterhe or she notifies the corporation of the dissenter'shis or her demand in
writing under subsection (a)(1) within thirty (30)30 days after the corporation made or
offered payment for the dissenter'shis or her shares.
[P.L.149-1986, Section 28.]
23-1-44-19. EFFECTC-7
164
450.1773 PETITIONING COURT TO DETERMINE FAIR VALUE OF SHARES
AND ACCRUED INTEREST; FAILURE OF CORPORATION TO PAY DEMAND - COMMENCEMENT OF JUDICIAL APPRAISAL
PROCEEDING. - (a)COMMENCE
PROCEEDING; VENUE; PARTIES; SERVICE; JURISDICTION; APPRAISERS;
DISCOVERY RIGHTS; JUDGMENT.
(1) If a demand for payment under IC 23-1-42-11 or under section 18 [IC 23-1-44-18] of this chapter772 remains unsettled, the
corporation shall commence a proceeding within sixty (60)60 days after receiving the
payment demand and petition the court to determine the fair value of the shares.shares
and accrued interest. If the corporation does not commence the proceedingsproceeding within
the sixty (60) day60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b)(2) The corporation shall commence the proceeding in the circuit or
superior court
of the county where ain which the corporation's principal office (or, if none
in Indiana, itsplace of business or
registered office)office is located. If the corporation is a foreign corporation
without a registered office or principal place of business in Indiana,this state, it
shall commence the proceeding in the county in Indianathis state where the principal
place of business or registered office of the domestic corporation merged with or whose shares
were acquired by the foreign corporationare to be valued was located.
(c)(3) The corporation shall make all dissenters, (whetherwhether or not residents
of this state)state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties mustshall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
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149
(d)(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (b)(2) is plenary and exclusive. The court may appoint one (1)1 or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e)(5) Each dissenter made a party to the proceeding is entitled to
judgment.
(1) Forjudgment for the amount, if any, by which the court finds the fair value of the dissenter'shis
or her shares, plus interest, exceeds the amount paid by the corporation;corporation or (2) Forfor
the fair value, plus accrued interest, of the dissenter'shis or her after-acquired shares for
which the corporation elected to withhold payment under section 17 [IC 23-1-44-17]771.
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450.1773a REFEREE; APPOINTMENT; POWERS; COMPENSATION; DUTIES;
OBJECTIONS TO REPORT; APPLICATION TO COURT FOR ACTION; ADOPTION,
MODIFICATION, OR RECOMMITMENT OF REPORT; FURTHER EVIDENCE;
JUDGMENT; REVIEW.
(1) In a proceeding brought pursuant to section 773, the court may,
pursuant to the agreement of this
chapter. [P.L.149-1986, Section 28.]
23-1-44-20. JUDICIAL DETERMINATION AND ASSESSMENTthe parties, appoint a referee selected by the
parties and subject to the approval of the court. The referee may conduct
proceedings within the state, or outside the state by stipulation of the parties
with the referee's consent, and pursuant to the Michigan court rules. The
referee shall have powers that include, but are not limited to, the following:
(a) To hear all pretrial motions and submit proposed orders to
the court. In ruling on the pretrial motion and proposed orders, the court shall
consider only those documents, pleadings, and arguments that were presented to
the referee.
(b) To require the production of evidence, including the
production of all books, papers, documents, and writings applicable to the
proceeding, and to permit entry upon designated land or other property in the
possession or control of the corporation.
(c) To rule upon the admissibility of evidence pursuant
to the Michigan rules of evidence.
(d) To place witnesses under oath and to examine
witnesses.
(e) To provide for the taking of testimony by
deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by any
of the parties, requiring the attendance and testimony of any witness and the
production of evidence including books, records, correspondence, and documents
in the possession of the witness or under his or her control, at a hearing
before the referee or at a deposition convened pursuant to subdivision (e). In
case of a refusal to comply with a subpoena, the party on whose behalf the
subpoena was issued may file a petition in the court for an order requiring
compliance.
(2) The amount and manner of payment of the referee's compensation
shall be determined by agreement between the referee and the parties, subject to
the court's allocation of compensation between the parties at the end of the
proceeding pursuant to equitable principles, notwithstanding section 774.
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(3) The referee shall do all of the following:
(a) Make a record and reporter's transcript of the
proceeding.
(b) Prepare a report, including proposed findings of fact and
conclusions of law, and a recommended judgment.
(c) File the report with the court, together with all original
exhibits and the reporter's transcript of the proceeding.
(4) Unless the court provides for a longer period, not more than 45
days after being served with notice of the filing of the report described in
subsection (3), any party may serve written objections to the report upon the
other party. Application to the court for action upon the report and objections
to the report shall be made by motion upon notice. The court, after hearing, may
adopt the report, may receive further evidence, may modify the report, or may
recommit the report to the referee with instructions. Upon adoption of the
report, judgment shall be entered in the same manner as if the action had been
tried by the court and shall be subject to review in the same manner as any
other judgment of the court.
450.1774 COSTS OF COSTS. - (a)APPRAISAL PROCEEDING.
(1) The court in an appraisal proceeding commenced under section 19 [IC 23-1-44-19] of this
chapter773
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against such parties andthe corporation, except that the court may assess costs
against all or some of the dissenters, in such amounts as the court finds equitable.
(b)equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 772.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1)equitable in the
following manner:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially comply with
the requirements of sections 10764 through 18 [IC
23-1-44-10 through IC 23-1-44-18] of this chapter; or
(2)772.
(b) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c)act.
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167
(3) If the court finds that the services of counsel for any dissenter
were ofor substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to thesethose counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefitted.
[P.L.149-1986, Section 28.]
C-5C-11
150168
INFORMATION NOT REQUIRED IN THE PROXY-STATEMENT PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- -------- -----------------------------------------
The Ohio General Corporation Law allows a corporation under certain
circumstances to indemnify its directors, officers, and employees. Generally,
whether by its articles of incorporation or its code of regulations or by
statute, the indemnification permits the Corporation to pay expenses actually
and necessarily incurred in the defense of any pending or threatened suit. The
determination of the right of indemnification is determined by a quorum of
disinterested directors not involved in such a pending matter and if they are
unable to make such determination, then such determination shall be made by
independent legal counsel, Bancorp'sFirst Financial's shareholders or by the Butler
County, Ohio, Court of Common Pleas. BancorpFirst Financial has such an indemnification
provision in its Code of Regulations, and that provision is set forth below. The
Code of Regulations of BancorpFirst Financial and the statute do not allow
indemnification of an officer or director wherein such person has been
adjudicated negligent or guilty of misconduct and, additionally, such officer or
director must have acted in good faith or had no reason to believe such
officer's or director's conduct was unlawful to be indemnified.
Article III-A of the Code of Regulations of BancorpFirst Financial provides:
SECTION 3-A.1. MANDATORY INDEMNIFICATION. The Corporation shall
indemnify any officer or director, or any other employee of the
Corporation who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including,
without limitation, any action threatened or instituted by or in the
right of the Corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, trustee,
officer, employee or agent of another corporation (domestic or foreign,
nonprofit or for profit), partnership, joint venture, trust or other
enterprise, against expenses (including, without limitation, attorneys'
fees, filing fees, court reporters' fees and transcript costs),
judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, he had no reasonable
cause to believe his conduct was unlawful. A person claiming
indemnification under this Section 3-A.1 shall be presumed to have met
the applicable standard of conduct set forth herein, and the
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contenderscontendere or its
equivalent, shall not, of itself, rebut such presumption.
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151169
SECTION 3-A.2. COURT-APPROVED INDEMNIFICATION. Anything contained in
the Regulations or elsewhere to the contrary notwithstanding:
(A) the Corporation shall not indemnify any officer or director
or employee of the Corporation who was a party to any
completed action or suit instituted by or in the right of
the Corporation to procure a judgment in its favor by reason
of the fact he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer,
employee or agent of another corporation (domestic or
foreign, nonprofit or for profit), partnership, joint
venture, trust or other enterprise, in respect of any claim,
issue or matter asserted in such action or suit as to which
he shall have been adjudged to be liable for misconduct
(other than negligence of any degree) in the performance of
his duty to the Corporation unless and only to the extent
that the Court of Common Pleas of Butler County, Ohio or the
court in which such action or suit was brought shall
determine upon application that, despite such adjudication
of liability, and in view of all the circumstances of the
case, he is fairly and reasonably entitled to such indemnity
as such Court of Common Pleas or such other court shall deem
proper; and
(B) the Corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as
contemplated by this Section 3-A.2.
SECTION 3-A.3. INDEMNIFICATION FOR EXPENSES. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent
that an officer, director or employee of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 3-A.1, or in defense of any claim,
issue or matter therein, he shall be promptly indemnified by the
Corporation against expenses (including, without limitation, attorneys'
fees, filing fees, court reporters' fees and transcript costs) actually
and reasonably incurred by him in connection therewith.
SECTION 3-A.4. DETERMINATION REQUIRED. Any indemnification required
under Section 3-A.1 and not precluded under Section 3-A.2 shall be made
by the Corporation only upon a determination that such indemnification
of the officer or director or employee is proper in the circumstances
because he has met the applicable standard of conduct set forth in
Section 3-A.1. Such determination may be made only (A) by a majority
vote of a quorum consisting of directors of the Corporation who were
not and are not parties to, or threatened with, any such action, suit
or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel other than an attorney, or
a firm having associated with it an attorney, who has
II-2
170
been retained by or who has performed services
II-2
152 for the Corporation, or
any person to be indemnified, within the past five years, or (C) by the
shareholders, or (D) by the Court of Common Pleas of Butler County,
Ohio or (if the Corporation is a party thereto) the court in which such
action, suit or proceeding was brought, if any. Any determination made
by the disinterested directors under subparagraph (A) of this Section
or by independent legal counsel under subparagraph (B) of this Section
to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right
of the Corporation shall be promptly communicated to the person who
threatened or brought such action or suit, and within ten (10) days
after receipt of such notification such person shall have the right to
petition the Court of Common Pleas of Butler County, Ohio or the Court
in which such action or suit was brought, if any, to review the
reasonableness of such determination.
SECTION 3-A.5. ADVANCES FOR EXPENSES. Unless the only liability
asserted against a director in an action, suit or proceeding referred
to in Section 3-A.1 of this article arises pursuant to Section 1701.95
of the Ohio Revised Code, expenses, including attorney's fees, incurred
by a director in defending the action, suit or proceeding shall be paid
by the Corporation as they are incurred, in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director in which he agrees: (i) to
repay amounts so advanced if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or
failure to act was undertaken with deliberate intent to cause injury to
the Corporation or with reckless disregard for the best interests of
the Corporation; and (ii) to reasonably cooperate with the Corporation
with respect to the action, suit or proceeding.
Expenses, including attorneys' fees, incurred by a director,
trustee, officer, employee or agent in defending any action, suit or
proceeding referred to in Section 3-A.3 of this Article, may be paid by
the Corporation as they are incurred, in advance of the final
disposition of the action, suit or proceeding as authorized by the
directors in the specific case, upon receipt of any undertaking by or
on behalf of the director, trustee, officer, employee, or agent to
repay such undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount if it is ultimately
determined that he is not entitled to be indemnified by the
Corporation.
II-3
171
SECTION 3-A.6. ARTICLE III-A NOT EXCLUSIVE. The indemnification
provided by this Article III-A shall not be deemed exclusive of any
other rights to which any person seeking indemnification may be
entitled under the Articles or the Regulations or any agreement, vote
of shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be an officer or director or employee of the Corporation and
shall inure to the benefit of the heirs, executors, and administrators
of such a person.
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153
SECTION 3-A.7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee or
agent of another corporation (domestic or foreign, nonprofit or for
profit), partnership, joint venture, trust or other enterprise, against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the obligation or the power to indemnify him
against such liability under the provisions of this Article III-A.
SECTION 3-A.8. VENUE. Any action by a person claiming indemnification
under this Article III-A, or by the Corporation, to determine such
claim for indemnification may be filed as to the Corporation and each
such person in Butler County, State of Ohio. The Corporation and (by
claiming such indemnification) each such person consent to the exercise
of jurisdiction over its or his person by the Court of Common Pleas of
Butler County, Ohio.
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
(a) See Index to Exhibits.
(b) See "F&M BANCORP"HASTINGS FINANCIAL STATEMENTS"CORPORATION FINANCIAL STATEMENTS."
(c) Fairness Opinion furnished as Appendix B to Proxy Statement-Prospectus.Statement-
Prospectus.
Item 22. Undertakings
- ----------------------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
II-4
172
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
II-4
154
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus
and furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
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173
(6) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act") and is used in connection with an offering of
securities subject to Rule 415 will be filed as a part of an amendment
to the registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(7) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such II-5
155
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
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156174
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hamilton, State of Ohio,
on December 22, 1995.September , 1996.
FIRST FINANCIAL BANCORP.
By:
/s/ Stanley N. Pontius
------------------------------------------------------------------------
Stanley N. Pontius
President and Chief Executive Officer
Date: December 22, 1995September 30, 1996
- -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
/s/ Stanley N. Pontius /s/ Richard E. Weinman
- --------------------------------------- --------------------------------------------------------------------------- -------------------------
Stanley N. Pontius, Director, President Richard E. Weinman, Exec.Michael R. O'Dell, Senior Vice
and Chief Executive Officer President, Chief Financial Officer
and Secretary
and Treasurer
Date: December 22, 1995September 30, 1996 Date: December 22, 1995
----------------------------------- ---------------------------------
/s/ Murph Knapke /s/ Vaden FittonSeptember 30, 1996
---------------------------------- ---------------------
- --------------------------------------- -------------------------------------
Murph Knapke,-------------------------------------- -------------------------
Lauren N. Patch, Director Vaden Fitton,Joel H. Schmidt, Director
Date: December 22, 1995September 30, 1996 Date: December 22, 1995
----------------------------------- ---------------------------------
/s/ Carl R. Fiora /s/ Thomas C. BlakeSeptember 30, 1996
---------------------------------- ---------------------
- --------------------------------------- -------------------------------------
Carl R. Fiora,-------------------------------------- -------------------------
Donald M. Cisle, Director Thomas C. Blake, Director
Date: December 22, 1995September 30, 1996 Date: December 22, 1995
----------------------------------- ---------------------------------
/s/ Joel H. Schmidt /s/ BarrySeptember 30, 1996
---------------------------------- ---------------------
- -------------------------------------- -------------------------
Vaden Fitton, Director Stephen S. PorterMarcum, Director
Date: September 30, 1996 Date: September 30, 1996
---------------------------------- ---------------------
- --------------------------------------- ------------------------------------
Joel H. Schmidt,-------------------------------------- -------------------------
Elden Houts, Director Barry S. Porter, Director
Date: December 22, 1995September 30, 1996 Date: December 22, 1995
----------------------------------- ---------------------------------
/s/ Arthur W. Bidwell /s/September 30, 1996
---------------------------------- ---------------------
- --------------------------------------
Joseph L. Marcum
- --------------------------------------- -------------------------------------
Arthur W. Bidwell, Director Joseph L. Marcum, DirectorM. Gallina, Comptroller
Date: December 22, 1995 Date: December 22, 1995
----------------------------------- ---------------------------------September 30, 1996
---------------------
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157175
INDEX TO EXHIBITS
Exhibit
Number Description
-
------- -----------
2.1 Plan and Agreement of Merger between First
Financial Bancorp. and F&M BancorpHastings Financial Corporation
(Included as Appendix A in
the Proxy Statement-Prospectus)
5. Opinion of Counsel
8. Form of Tax Opinion of Ice Miller DonadioWerner & RyanBlank Co., L.P.A.
to be Issued on Consummation of Merger
23.1 Consent of Ernst & Young LLP, Independent Auditors
for First Financial Bancorp.
23.2 Consent of Crowe, Chizek and Company LLP, Independent
Auditors for F&M Bancorp.Hastings Financial Corporation.
23.3 Consent of Beene, Garter & Co., Independent Auditors
for Hastings Financial Corporation's Consolidated
Statement of Income and Consolidated Statement of
Cash Flows for the Year Ended December 31, 1993.
23.4 Consent of Frost & Jacobs, Counsel for Registrant
(Incorporated in Exhibit 5)
23.423.5 Consent of Ice Miller DonadioWerner & RyanBlank Co., L.P.A.
(Incorporated in Exhibit 8)
23.523.6 Consent of Professional Bank ServicesAustin Associates, Inc.
(Incorporated in Exhibit 99.1)
99.1 Fairness Opinion of Professional Bank ServicesAustin Associates, Inc. (Included
as Appendix B in the Proxy Statement-Prospectus.)
99.2 Exchange Agent Agreement
99.3 F&M'sHastings Financial's Form of Proxy
II-8